Lawmakers pass UI tax relief bill

  • IGE

A bill that aims to provide unemployment insurance relief to Hawaii employers has been sent to Gov. David Ige for consideration.

If signed by the governor, House Bill 1278 will, among other provisions, temporarily reduce the unemployment insurance contribution rates. The legislation was sent to the governor after unanimously passing both chambers of the Legislature.

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“This measure is critical in helping to protect employers from facing higher tax rates at a time when they can least afford it,” state Sen. Brian Taniguchi, chairman of the Senate Committee on Labor, Culture and the Arts, said in a statement. “Without any legislative intervention, the unemployment tax rate schedule would be set to the highest rate at Schedule H, and many businesses would continue to struggle while trying to survive this pandemic.”

According to the DLIR website, contribution rates are based upon the ratio of the employer’s reserve balance to average annual payroll. There are eight possible tax schedules, A-H.

The bill will set the unemployment insurance rates according to Schedule D through 2022. Schedule D was last used in 2015.

In written testimony submitted before a Feb. 18 hearing of the Senate’s Labor, Culture and the Arts Committee and Ways and Means Committee, Department of Labor and Industrial Relations director Anne Perreira-Eustaquio said the department supported the measure.

Perreira-Eustaquio said in her testimony that the Unemployment Compensation Trust Fund had a reserve of more than $607 million as of November 2019, but the balance was depleted in June 2020 due to the “extraordinary unemployment rate” caused by the COVID-19 pandemic.

According to Perreira-Eustaquio, in 2021 and 2022 the tax rate schedule would be at Schedule H — the top rate — without intervention by lawmakers.

“The DLIR supports the effort to provide relief to contributory employers by temporarily suspending the statutory schedule,” she wrote. “The COVID-19 pandemic created an unprecedented increase in Hawaii’s unemployment rate as the seasonally adjusted unemployment rate increased to 23.6% in April (2020) from 2.7% in February (2020). This temporary relief will help ensure employees can return to work safely, and employers can rehire their employees once the immediate public health crisis abates. It will also help ensure more businesses will be able to survive this crisis and rehire their employees once they can safely resume operations.”

Victor Lim, legislative lead for the Hawaii Restaurant Association, said the organization, which represents 3,400 restaurants in the state, strongly supports the measure.

“Most restaurant operators here do not expect business conditions to improve much in the coming years, and 43% say it is unlikely their restaurant will still be in business six months from now without additional relief packages from the federal government,” he wrote.

“To say that many businesses here in Hawaii are in dire straits will be an understatement.”

Lauren Zirbel, executive director of the Hawaii Food Industry Association, said the measure is necessary in order to prevent abrupt and unmanageable increases in the contributions required by employers.

“Under the current schedule, the required contributions for many employers would quadruple; for other employers, the required contribution would increase more than tenfold,” she wrote.

The Kona-Kohala Chamber of Commerce, which represents nearly 500 businesses in the Kona and Kohala districts, also expressed support for the bill.

“West Hawaii businesses were especially hard hit in 2020 due to COVID-19 impacts that resulted in severe loss of business and mass employee layoffs,” President and CEO Wendy Laros wrote in submitted testimony. “With the governor’s stay-at-home order for nonessential workers and mandatory 14-day quarantine for travelers, many businesses in our region were unable to operate at no fault of their own.”

Although the Safe Travels program has helped increase the number of visitors to the Big Island, forecasts for 2021 are approximately a million fewer visitors than in 2019, she said.

“Our businesses need customers to survive,” Laros said. “COVID-19 will continue to impact our visitor industry in 2021 and 2022, and our businesses will continue to struggle. This is not the time to increase the cost of doing business. We support the legislation to reduce the unemployment insurance tax rate for employers that would otherwise rise dramatically in March 2021.”

The bill was introduced by Rep. Richard Onishi, a Big Island Democrat whose district stretches from South Hilo to Pahala.

“Our businesses are struggling and need support. By adjusting the unemployment insurance contribution rates, we are giving them a tax break that will hopefully help them stay in business without further layoffs,” he said in a news release. “Together we will get through this economic downturn and pandemic.”

A spokeswoman for Ige said that as with all bills that come to the governor, HB 1278 will first undergo legal and departmental review.

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“However, the governor understands the importance of this measure, and will expedite the review process before making his decision,” she said.

Email Stephanie Salmons at ssalmons@hawaiitribune-herald.com

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