Legislative proposals could lower 2021 tax rates
Governor Inslee is proposing legislative measures to provide unemployment tax relief for Washington businesses, enhance unemployment support for Washington workers and otherwise improve the Unemployment Insurance (UI) program. Taken together, these measures will enhance the state’s ability to respond to the economic impact of the COVID-19 pandemic.
Commissioner LeVine's statement on Governor Inslee's proposals
See how legislative tax relief proposals might affect your unemployment taxes. Compare curent 2021 taxes with proposed governor/legislative tax relief using this comparison calculator.*
*Do not use the comparison calculator for tax purposes. It's based on the Governor's proposal as of Dec. 16, 2020 and will change.
State UI Tax Relief
- The proposal is projected to prevent over $790 million in employer tax increases in 2021 and approximately $1.9 billion in tax increases over the 2021-2025 time period.
- The 2020 average unemployment tax rate is 1.03% of taxable wages, a tax rate that is projected to increase to 1.88% in 2021. Under the legislation, the average 2021 unemployment tax rate is projected to be 1.17%, a 38% a tax cut.
- The proposal provides over $750 million in relief of benefit charges for all employers for benefits paid to employees from March 22 through May 2, 2020 during the “Stay Home, Stay Healthy” order.
- Under current law, the flat social tax will be 1.22% of taxable wages in 2021 and is projected to remain at 1.22% in 2022. The proposal reduces the flat social tax to .50% in 2021 and .75% in 2022 before gradually increasing it annually until it reaches .90% in 2025.
- The proposal suspends the solvency tax, through 2025. The solvency tax can be as much as .20% of taxable wages per year if the UI trust fund does not have enough reserves on September 30 of any given year to pay 7 months of benefits.
- The proposal expands beginning in 2022 the period for calculating employer experience rate taxes from 4 years to 5 years, lowering the projected average experience rate tax by .13-.18% of taxable wages from 2022-2024.
Increased UI Minimum Weekly Benefit Amount
- The proposal increases the weekly minimum benefit amount from 15 percent of the average weekly wage to 20 percent of the average weekly wage beginning July 1, 2021.
- Accordingly, the minimum benefit amount is projected to increase from $201 to $270 in July 2021.
- Under the proposal, Washington will maintain the highest weekly minimum weekly benefit amount in the nation.
Voluntary Contributions Program Enhancement
- In 1995, Washington adopted a “voluntary contribution” provision in state law that was explicitly adopted to help small businesses that saw large increases in their experience rate. The program allows employers to reimburse the Employment Security Department (ESD) for benefits paid up front, in exchange for subtracting those benefit charges from the employer’s account, which reduces the employer’s experience tax rate.
- The proposal provides further incentives for businesses to use the program by removing the 10% surcharge, opening the program up to employers that have moved 8, rather than 12, rate classes, allowing employers to buy down enough benefit charges to move down 2, rather than 4, rate classes, and extending the deadline to apply from February 15 to March 31.
- Example: A business has annual taxable payroll of $200,000 every year. The business had $0 in benefit charges before 2020 placing it in Rate Class 1 with a 0% experience tax rate. The business incurs $15,000 in benefit charges in 2020. For 2021-2024, the business would jump to Rate Class 40 with a 5.40% experience rate tax and $10,800 in taxes owed annually for 4 years ($43,200 from 2021-2024). Under the program, if the business pays $15,000 to offset the benefit charges, it goes back to Rate Class 1 saving $28,200 from 2021-2024.
Unemployment Benefits for High Risk Individuals
- The proposal allows high-risk individuals, or those who live with high-risk individuals, to voluntarily quit their job with good cause if they cannot work from home for that employer but are otherwise able and available to work from home for other employers. Benefits will not be charged to the individual’s separating employer.
- The proposal makes it so high-risk individuals, and those who live with high-risk individuals, are considered available for work if they can work from home.
- The proposal requires the Department, when deciding whether work is “suitable” for claimants, to account for any potential health risks to high-risk individuals living with the claimants.
Public Health Emergency Benefit Charge Relief
- The proposal amends state law so employers that must close or severely curtail operations are relieved of benefit charges when the resulting layoffs are directly attributable to the presence of any dangerous, contagious, or infectious disease that is the subject of a public health emergency at the employer’s plant, building, worksite or other facility.
Eliminate Lump Sum Retirement Benefit Deductions
- The proposal amends state law so that lump sum retirement payments are no longer required to be prorated over the life expectancy of an unemployment claim with that prorated amount deducted from weekly benefits.
- The requirement set over 3,300 issues on claims requiring over 5,000 hours of work in 2020 holding up payment and slowing adjudication on unemployment claims.
- A Governor Emergency Proclamation temporarily freezing the statute will provide immediate relief and permanently eliminating the requirement will prevent the issue from slowing down payments for claimants in the future.
Emergency Waiting Week Waiver
- The proposal amends state law to waive the waiting week and to not charge those benefits to employers when they are fully financed by the federal government. This change will allow claimants to receive unemployment benefits sooner and provide employers one less week of benefit charges during economic crises.
Shared Work Charging
- The proposal amends state law so that Shared Work benefits are not charged to employers when they are fully financed by the federal government.
- Shared Work: The proposal amends state statute so that employers are required to have at least two employees enrolled in the Shared Work program to participate (state statute currently requires one) and makes clear that employees in the Shared Work program can participate in approved training. The U.S. Department of Labor (USDOL) identified conformity issues with the current state statute.
- Trade Adjustment Assistance: The proposal makes minor technical corrections to state statute related to TAA training to reflect new federal rules recently finalized by USDOL.
Federal Trust Fund Loan
- The proposed tax measures are projected to necessitate that the state take out federal loans of roughly $418 million beginning in the 4th quarter of 2021 with those loans paid back by November 2023 and therefore not triggering an increase in employers’ federal unemployment taxes.
- Under the proposal, the UI trust fund balance is projected to be roughly $701 million at the end of 2023, $1.6 billion at the end of 2024 and $2.8 billion at the end of 2025.