New bill promises help for Washington businesses still feeling unemployment tax pain
The unemployment tax bill signed into law last month brought unemployment insurance tax relief to small businesses across the state.
Taxes were set to spike to refill the state’s Unemployment Trust Fund after a year of record-setting unemployment numbers not seen since the Great Depression.
But even with the bill helping to lower the tax hike, some businesses are still looking at significant increases.
Brent Phelps, who owns gyms in Sumner and Auburn, told KIRO Radio’s Dori Monson this week that his unemployment insurance premiums are increasing by 1,000%.
“The one gym is 1.42% as our new rate, the other gym is 1.13%. So basically, we went in our Sumner facility from $443 a year to $4,842 a year. And in Auburn, from $624 a year to $5,424 a year,” he said. “And all this is based on claims that were made for people that I laid off due to being mandated closed by the pandemic.”
Had the unemployment bill not passed, Phelps said he was told by the Employment Security Department that he would’ve seen a 4,000% spike.
KIRO Radio reached out to Sen. Karen Keiser (D-Des Moines), the prime sponsor of the February unemployment bill, to learn why some business owners are still seeing increases — and what solutions are in the works.
Keiser acknowledged that the bill that was passed, while a big step in the right direction, was not a perfect fix-all.
“I don’t think our work is done, but I’m pleased that we’re able to at least soften the rate increases, and eliminate many of the other spikes that would have been hitting them,” she said. But, “we’ve got more work to do, in my opinion.”
She said that the owner of the hair salon she visits had previously seen rates 6.5 times what he currently pays. After the bill, his premiums were what he called “manageable.”
“It’s still an increase, but it’s not the increase that would have put him out of business,” she said.
Keiser explained that like any insurance, unemployment insurance premiums go up when a person has a claim. Instead of a car accident, a claim in the unemployment insurance world is laying off an employee.
That means the businesses that were forced to shut down the longest — and therefore likely had to lay off the most employees — are now seeing the highest spikes in premiums. That includes gym owners, like Phelps.
“All of the most vulnerable sectors of our economy that were in total shutdown have been hit the hardest, … so it’s important to make sure we get the relief to those that have been hit,” Keiser said.
That’s why she is bringing forward a new bill this week to cut down on unemployment tax for those businesses.
“It targets, specifically, 13 more sectors that are still being hurt by big spikes in their premiums,” she said.
Those sectors include gyms, restaurants, bars, nightclubs and other performance venues, and tourism-related businesses. Other small businesses with fewer than 40,000 employees will also be able to apply for relief.
Keiser said the tax hike is a real one-two punch for the mom-and-pops that are already suffering from having to shut their doors for months.
“They feel like they’ve been cheated,” Keiser said. “And that’s a bad feeling. We want to make sure they don’t have that feeling.”
The bill will allow them to bring down their rate class, which is based on their layoff experience. She compared lowering a business’ rate class to wiping a car accident off a driver’s car insurance record.
“It is another dial that we can turn for them so that their premiums will not sustain for the next three quarters,” she said.
Keiser said this problem will be ongoing in the coming years, as the trust fund is rebuilt. She is open to a variety of solutions in that time.
“We’re going to continue to work with them,” she said. “This is another bite of the apple, and may not be the last bite.”
She noted that last year’s fraud attack affected federal unemployment money, for the most part, instead of the state’s trust fund.
“We lost about $81 million to the fraudsters out of the trust fund, that’s out of a $5.8 trust fund,” she said. “So it didn’t make a dime’s worth of difference to anybody in terms of premiums.”
Still, she said, she expects legislators will come to an agreement to backfill the $81 million with General Fund dollars.
The Employment Security Department welcomes the chance to work with Keiser and other legislators on the new bill.
“With this bill, the Legislature is demonstrating their continued interest in providing additional relief to employers who’ve been hit the hardest by the pandemic and accompanying shutdowns,” the department said. “We’re actively working with the sponsor to provide technical assistance for smooth implementation in the event it’s passed.”