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Ige signs bill to ease tax burden on employers

The Maui News

Gov. David Ige signed a law on Monday that will temporarily reduce unemployment insurance contribution rates as the state continues to grapple with high jobless rates.

House Bill 1278, now Act 1, sets the employer contribution tax rate at a lower level with Schedule D for 2021 and 2022. Without intervention, Schedule H (the highest tax rate) would have been in effect for 2021, the Governor’s Office said in a news release Tuesday.

“Temporarily reducing unemployment insurance tax rates will help to contain the economic fallout from COVID-19 and expedite the state’s economic recovery,” Ige said. “I signed HB 1278 to protect employers from higher tax rates at a time when they can least afford it.”

The measure allows employers to pay, on average, less than half of what they would otherwise pay into the system.

In 2021, the average Schedule H tax on employers would have been $1,800 per employee, per year, the Governor’s Office said. Act 1 reduces the average tax to $850 for a savings of $950 per employee per year.

In 2022, the average tax would have been $1,670 per employee, per year. Act 1 reduces the average tax to $790 for a savings of $880 per employee per year.

“I’d like to thank the Legislature for fast-tracking this measure, so the DLIR (Department of Labor and Industrial Relations) can implement the changes swiftly,” Ige said. “This is another example of how the legislative and executive branches can work together to boost the state’s economic recovery.”

The Unemployment Compensation Trust Fund had a reserve of $607.5 million as of November 2019, but the fund’s balance was depleted in June due to the extraordinary unemployment rate, which skyrocketed from 2.3 percent in March 2020 to 23.6 percent the following month, the Governor’s Office said.

“The law allows the department to omit benefit charges for employers in their annual rate calculation due to the event of COVID-19 in calendar years 2021 and 2022 and authorizes the DLIR to provide relief for certain nonprofit employers,” DLIR Director Anne Perreira-Eustaquio said. “Omitting the benefits charged to all contributory employers in 2021 and 2022 will result in a significant decrease in employer contributions.”

Setting the tax rate schedule at D will mean that all contributory employers will share in the replenishment of the Unemployment Compensation Trust Fund and help reestablish the fund’s integrity. Schedule D’s tax rates are 0.2 percent to 5.8 percent while Schedule H’s rates begin at 2.4 percent to 6.6 percent.

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