Gov. Lingle Approves Legislation to Save Employers $77 Million in Unemployment Insurance Taxes

Urges Legislature to enact further reductions to save $497 million more

HONOLULU – Governor Linda Lingle today signed a new law that will lower unemployment insurance (UI) taxes paid by all employers. Act 2 (HB2169 HD2) will save businesses an estimated $77 million in unemployment insurance tax payments over the next four years.

“While this law helps businesses get some tax relief as they struggle to keep their doors open and retain their employees, it falls far short of what is needed to grow our economy,” Governor Lingle said. “I urge the Legislature to take up this matter next year and pass a bill similar to the one I proposed that would have saved employers $497 million and kept close to a half billion dollars in our local economy.”

Act 2 will reduce average unemployment insurance tax rates for FY 2010 to $630 from the original projection of $1,070. However, the rate jumps to an average of over $1,500 per employee by 2012. This measure sets the wage base for paying the taxes at 90 percent of the annual wage average, equal to $34,900.

By contrast, the Lingle-Aiona Administration proposal (HB2579/SB2732) would have kept the average insurance tax at $600, $690, $880, and $900 for the next four years and would have used a wage base of $27,200 for the first year.

Act 2 also adds $8 million to the tax burden of employers by keeping the average weekly unemployment benefit at a higher rate than current law.

“Despite these shortcomings in the measure, Governor Lingle signed the bill recognizing that some tax relief for employers is better than nothing,” Labor and Industrial Relations Director Darwin Ching said. “The Legislature has the opportunity and the obligation next year to grant further unemployment insurance tax relief since our economy will still be in a fragile recovery,” Ching added.

Act 2 takes effect immediately. The new unemployment insurance tax rates will be reflected in billings employers in the state will receive later this month.

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