State cuts unemployment tax rate on businesses
HONOLULU (HawaiiNewsNow) - The state may be playing Santa. The state Department of Labor and Industrial Relations announced Wednesday that it is cutting the unemployment tax rate for businesses by 26 percent next year.
The department said employers will pay about $300 per employee in unemployment taxes, or about $100 less than this year. Businesses were paying $910 per employee in 2013.
That money goes into the fund used to pay unemployment benefits to persons who lose their jobs.
"If there are a lot of claims and a lot of money goes out, then rates go up," said Tom Yamachika, president of the Tax Foundation of Hawaii.
Yamachika and economists said the fund is supposed to be self-sustaining. The Unemployment Compensation Trust Fund actually went bankrupt in December 2010 during high unemployment, and the state had to borrow $183 million from the federal government.
"At that time a lot of state had to borrow money from Uncle Sam, but we, among several other states, paid it back," said Yamachika.
The state said it now has $460 million in the fund, enough to pay 13 months of unemployment benefits. That amount, combined with a low 3.2 percent unemployment rate in November, triggered the tax reduction, which totals $50 million.
State labor officials and Gov. David Ige said these are signs that Hawaii's economy is strengthening, and that employers can invest the savings into their businesses. But some small businesses say it won't help that much.
"It's going to be a drop in the bucket compared to our other taxes and other expenses like rent and things like that," said Nat Bletter of Madre Chocolate, a small shop in Chinatown. "Nice Christmas present, but not hugely significant."
Still, it's sweet to have a tax cut.
"It beats the alternative," said Yamachika.
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