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Hawaii Unemployment Insurance Tax 2010

Hong Kong.China.Hawaii Chamber of Commerce (HKCHcc) is working collaboratively with the Chamber of Commerce Hawaii through the legislative process to lessen the impact of the substantial increase of the unemployment tax.

Unemployment Insurance

I have just got word that the hearing http://www.capitol.hawaii.gov/session2010/hearingnotices/HEARING_LAB_01-26-10_.HTM on UI bills is scheduled for this Tuesday, January 26 at 9:00 a.m. in room 309. Please encourage your members to submit testimony prior to the hearing and testify at the hearing. A huge turnout will set the tone and path of the UI bill.

Also, they DO NOT plan to schedule our bill, HB 2201, so far (however, this may change as they just got word of the bill so they may add it to the hearing notice). Only HB 2169 (Karl Rhoads) and HB 2207 (Kyle Yamashita) are on the notice so far.

Therefore, it will be imperative to state in the testimonies that you “support the language of HB 2201.” http://www.capitol.hawaii.gov/session2010/bills/HB2201_.pdf  

Below is a header to get a head start in preparing your testimony. I will sending you additional information once I get the hearing notice. Also, please note that testimonies will only be accepted on the Capitol website or via fax. E-mails will not be accepted.

DIRECTIONS ON SUBMITTING TESTIMONY

Testimony will NOT be accepted via e-mail. Members can submit testimony via:

1. On-line at http://www.capitol.hawaii.gov/emailtestimony/ 

OR

2. Faxed to (808) 586-6331 or 1-800-535-3859 (neighbor islands)

Try to submit testimony 24 hours prior to the hearing. This allows the chair and committee members enough time to thoroughly review the testimonies. HOWEVER, if you are unable to submit testimony by this deadline, please proceed to submit. It will still be considered.

DIRECTIONS ON ORAL TESTIMONY

The following provides some information for those attending the hearing:

* A two-minute oral testimony limit will probably take place.
* The UI bills are the first two on the agenda., so contingent on the number of testifiers, the hearing should end by noon.
* You are not required to stay for the entire hearing and may leave after you provide testimony. The order of testifiers is based on the order the committee receives written testimonies.
* Metered parking is available at the Capitol. Discounted parking is available at Alii Place on Alakea or at any downtown municipal parking lots.
* Tell your “story” however, please be courteous and professional.

If possible, please e-mail me a copy of your testimony and let me know if you plan to attend the hearing. If you have any questions, please do not hesitate to contact me. Thank you for your time and support. Together we can make a difference.



Header for Testimony

Testimony to the House Committee on Labor & Public Employment
Tuesday, January 26, 2010; 9:00 a.m.
Conference Room 309

RE: HOUSE BILL 2169 and 2207 RELATING TO EMPLOYMENT SECURITY

Chair Rhoads, Vice Chair Yamashita and Members of the Committee:

My name is [FULL NAME] and my company is [NAME AND DESCRIPTION OF COMPANY INCLUDING # OF EMPLOYEES]. I appreciate the efforts made by the chair and the committee in addressing the unemployment insurance tax increase. I support HB 2169 and 2207 with amendments.

[STATE HOW THE INCREASE WILL IMPACT YOUR BUSINESS INCLUDING POTENTIAL JOB LOSSES, BENEFITS, AND OVERALL PERFORMANCE AS WELL AS COST PER EMPLOYEE, IF POSSIBLE].

To help reduce the “tax shock” and safeguard the statewide unemployment rate, please amend the bill by holding the tax rate schedule to D in 2010 and F in 2011, permanently set the taxable wage base at 90% and maintain the adequate reserve multiplier at 1.0.

This will reduce the impact of the tax increase on the average and small businesses. Extending the tax assistance beyond 2010 will save jobs, preserve businesses and spur the economy by keeping more dollars flowing into the economy through wages and purchases. This will help businesses plan expenses over a longer period of time.

Thank you for the opportunity to submit testimony. If you have any questions, please contact me at [FULL CONTACT INFORMATION].

Thank you for the opportunity to submit testimony.

Additional information, please contact: Johnson Choi, President, Hong Kong.China.Hawaii Chamber of Commerce at (415) 963-1541 or 691-6138 (San Francisco USA); (808) 524-5738 (Hawaii USA), (852) 8171-3118 (Hong Kong SAR); Fax (808) 524-8063 or by email to johnsonchoi@johnsonchoi.com  or jwkc8168@yahoo.com

CHAMBER UNEMPLOYMENT INSURANCE JOB PRESERVATION BILL

Current State of Unemployment Insurance
An immediate ten-fold increase in the average unemployment tax could result in the loss of 5,000 to 14,000 jobs in 2010, and many business closures. The “tax shock” will hurt the overall economy and employment just as our economy is beginning to recover. For example, the net effect of the unmoderated UI tax increase alone on a business with 40 employees paying $40,000 in annual compensation would be one job reduction.

Fact
The Unemployment Trust Fund must be replenished to adequate reserve levels through increased tax paid by Hawaii private sector employers.

In 2007, Act 110 passed which was intended to provide unemployment insurance tax relief for three years to employers. However, a trigger in the bill allowed the relief to sunset if the UI fund fell below the adequate reserve level. The world-wide recession and job loss in Hawaii have triggered the loss of the tax relief after two years and the dramatic tax increase to replenish the UI Fund.

Reasons for Unemployment Insurance Tax Assistance Legislation
Not passing C3 will result in further job cuts, as the cost to every employer for each employee is increased resulting in increased unemployment. This will drive the unemployed to the UI fund, further driving it to insolvency.
• Moderating this increase over a few years will:
o help the economy recover faster and create jobs,
o help businesses plan expenses over a larger period of time,
o minimize the impact on jobs, wage or benefits reductions.
• Businesses will restore the Trust Fund to adequate reserve levels fairly quickly once the economy and employment recover.
• Borrowing from the federal government in the short term is good for the economy and employers will pay off any loans as the interest is accrued.

Evaluation of Alternatives
The Chamber’s Alternative (C3) can be broken down into three main components:
• Reduce the Tax Rate by holding the tax rate schedule to D (from F) in 2010 and F (from H) in 2012 to reduce the impact of the tax increase on the average and small businesses.
• Changing the tax rate schedule will reduce the immediate “tax shock” and will safeguard the statewide unemployment rate.
• Borrowing (estimated at $4 million) to keep the UI Fund solvent keeps $289 million* in the state economy over 2010-2011 that would otherwise be unused and accumulated in the Trust Fund instead of providing stimulus for the economy. Reducing the tax rate will provide immediate relief to businesses, as the tax will be reduced on the first dollar of wages paid in 2010.
• Set the Taxable Wage Base at 90% of the Average Annual Wage rather than 100% to provide ongoing relief to those hardest hit by the recession. Also, reducing the taxable wage base will reduce taxes over the year, but only when employees exceed 90% of the average annual wage base (in 2010, $34,900).
• Maintain the Adequate Reserve Ratio at 1.0 as opposed to increasing it to 1.5 in 2011 so that the funds are circulated within the economy. 12 months of benefits for the worst year in the past ten years is more than adequate reserves according to most experts.

* The Chamber’s analysis is even more conservative than UHERO projections by factoring in a 30% higher projected total unemployment rate due to rising taxes or changes in average tax rate due to employer reserve reductions.

NEWS UPDATES (from most recent to the latest news)

 January 26 2010

First, much Mahalo to all of you for submitting testimony as well as for those who testified at this morning’s hearing. More than 100 testimonies from companies and organizations statewide were submitted. We truly appreciate the time you and your members took to support the Chamber’s proposal.

Unfortunately, Chair Rhoads did not incorporate any of the language from HB 2201 (Chamber bill). The only amendments that he proposed, were:

· Lowering the reserve ratio multiplier from 1.5 to 1.25

· Require DLIR to do calculations every 6 months than a year so that payments can be spread out instead of a once-a-year high payment

He moved HB 2169 out of committee and deferred HB 2207 (Yamashita’s). So, we have one vehicle moving that will go to House Finance, Senate Labor and Senate Ways and Means. It will be imperative that we continue to voice our concerns and support the language of HB 2201. I will be sending you a strategic and grassroots plan in the next few days.

Once again, thank you so much for your time and continued support.

Aloha, Sherry

Posted on: Tuesday, January 26, 2010

Lingle plan halves employers' tax hike By Greg Wiles Advertiser Staff Writer

http://www.honoluluadvertiser.com/article/20100126/BUSINESS/1260313/-1/nletter03?source=nletter-

An onerous jump in unemployment taxes paid by Hawai'i employers would be reduced under a legislative proposal put forth by Gov. Linda Lingle.

Lingle yesterday unveiled her plan to blunt the increase set to take effect this year, with a series of temporary changes that would require the state to borrow more money from the federal government but save businesses nearly a half a billion dollars over a four-year period.

Lingle, along with Rep. Karl Rhoads, other legislators and the Hawaii Chamber of Commerce, have come out with proposals to mitigate the increase, which is mandated by law because of dwindling balances in the fund from which unemployment taxes are paid.

Unless the law is amended, the average annual tax paid by employers in the fund is scheduled to shoot up nearly twelve folds — from $90 annually to $1,070. For an average employer with 10 workers, the bill would skyrocket from $900 annually to $10,070.

Business groups, along with the Lingle administration and legislators, have worried the increase would further damage the state's economy. They worry that employers would be forced to let go workers to pay for the increase.

Yesterday Lingle proposed changes that would about halve the increase, with the bill going to $600 this year, or roughly 60 percent of what's scheduled.

"Under our proposal, employers will pay only 60 percent of anticipated tax hikes, saving businesses $497 million over the next four years," Lingle said in her State of the State address yesterday.

"We believe strongly that anything beyond this 60 percent threshold will cause large job losses."

The unemployment tax is set through a complex formula that includes the amount of wages to be taxed, various tax rates that can be triggered depending on the unemployment trust fund finances and benefit payment levels.

Under Lingle's proposal, there would be no cuts to the benefit levels. The plan also envisions borrowing more money from the U.S. government than some other proposals and features an increase to higher taxes during the middle part of the decade.

A comparison of plans by the state Department of Labor and Industrial Relations shows the average tax per employee would go to $600 this year, $690 next and $880 in 2012.

Big increase later

In 2013 the average assessment would be $900 per employee, followed by a jump to $1,310 in 2014.

Labor Department spokesman Ryan Markham said the proposal is structured so that the big increases come in several years' time, when the economy will presumably be better and employers can better afford the increase.

"It would help the economy the most," he said.

It also would come with a bigger borrowing bill than other proposals from Rhoads or the Chamber of Commerce. Lingle's plan envisions the fund running deficits and requiring federal borrowing for the next four years.

Rhoads, who heads the House Labor Committee, and the Chamber's proposals each propose running deficits for two years. Rhoads yesterday said he had tried to come up with the best bill possible in time to get it before his committee so that a March deadline could be met for avoiding the big increase in unemployment taxes.

He said he had worked with the Labor Department and others and gone through eight revisions before having to conclude his work.

"There's so many ways to skin this cat that no matter which approach you take there is some arbitrariness to it," Rhoads said. "At some point you have to draw a line in the sand."

As proposed, Rhoads' bill relies on less borrowing, calls for the tax to rise to an average of $630 this year, and $1,290 next. A hearing on his measure is scheduled for this morning.

The Chamber proposal is similar to Rhoads' plan in that unemployment trust fund deficits would occur this year and next. It calls for average assessments to rise to $630 this year and $970 in 2011.

Rhoads said he would have hoped the Lingle administration would have come in earlier with its proposal so that he could review it and get it up for hearing earlier. The deficits projected in years three and four of Lingle's plan also concern him.

Markham said the state's proposal will cost about $22 million in interest and that Lingle is hoping Congress extends a moratorium on states having to pay interest on the unemployment fund borrowing.

As it stands, however, the administration believes the proposal provides a good tradeoff — $22 million in costs that will ultimately be paid by employers for avoiding $497 million in unemployment taxes.

Reach Greg Wiles at gwiles@honoluluadvertiser.com

Pacific Business News (Honolulu) Monday, January 25, 2010, 1:12pm HAST

http://pacific.bizjournals.com/pacific/stories/2010/01/25/daily9.html?ed=2010-01-25&ana=e_du_pub

Lingle seeks 40% cut in jobless tax rate

As anticipated, Gov. Linda Lingle on Monday proposed a big break in the unemployment insurance tax paid by Hawaii businesses.

If approved by the Legislature, Lingle’s plan would allow employers to pay only 60 percent of the amount they were to pay in unemployment tax bills coming due this year.

The governor said the plan would save businesses $497 million over the next four years. It would mean the average business would pay unemployment insurance tax of about $600 per year per employee, rather than the $1,000 that is required by the existing law.

Businesses are now paying about $90 a year because of a temporary tax break that started in 2008.

The Republican governor, who made her remarks during her final state-of-the-state address at the Capitol, urged lawmakers to pass unemployment legislation insurance before mid-March. That’s when the Hawaii Labor Department must send out unemployment insurance bills to businesses across the state.

Also in her address, Lingle proposed an income tax credit that would grant credits equal to wages withheld by employers for new, full-time permanent position filled by a resident who is currently receiving unemployment benefits.

The program would cover a three-year period of 2010 through 2012, when Hawaii’s economy is expected to gradually recover.

To continue to draw credits, businesses would need to remain operational for two years after their final tax credits are received.

Hawaii’s unemployment rate rose from 3 percent in January 2008 to about 7 percent this year.

(Source & Credit: Chamber of Commerce Hawaii)

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