The tripling of Hawaii businesses’ yearly unemployment tax set for 2021, as predicted by a nonprofit policy research organization, will disrupt the state’s economic recovery, some leaders said.
The Grassroot Institute of Hawaii reported in a press release that businesses’ unemployment tax rate would “automatically triple in 2021 to an average of 3.65% or $1,757 per employee, up from 1.11% or $534 per employee.”
“That’s because the tax moves up or down depending on the funded ratio of the state unemployment fund, which is $664 million in the red this year because of the state’s coronavirus-inspired lockdown,” the press release said. “This sets the unemployment tax to ‘Schedule H,’ which is a record high level for Hawaii, and the maximum rate allowable by Hawaii law.”
Under Schedule H, the tax is between 2.2% and 6.6%, which depends on several factors, including the amount employers contributed to the fund in years past, the press release said.
“Employers will be advised of their contribution rates in March of each year,” the State of Hawaii Unemployment Insurance “Handbook for Employers” said.
The Grassroot Institute said in the press release that failure to address the legally required increase could discourage employers from hiring back employees after the lockdowns.
“The additional taxes will make businesses more reluctant to hire workers, stalling the recovery and sending the state in a tailspin,” Keli’i Akina, the institute’s president and CEO, said in the press release.
The Star Advertiser said the Chamber of Commerce Hawaii said that an unemployment tax increase would slow rehiring, cause more layoffs and that companies would reconsider whether or not to give employees cost-of-living increases, raises and “other benefits.”
Sherry Menor-McNamara, president and CEO of the Chamber of Commerce Hawaii, told the Star Advertiser that “the chamber is working with state Rep. Sylvia Luke, who chairs the House Finance Committee, to fast-track legislation to mitigate the mandated rise.”
“This is going to be an issue to watch and get involved in as we ready for the opening of the Hawaii State Legislature. Join us for Chamber Week that kicks off on Jan. 19 and find out how to get involved,” the Chamber of Commerce Hawaii’s Jan. 11 post on its Facebook page said.