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33% Unemployment Tax Hike Discourages Job Growth

Posted by John Regan on Jan 2, 2014 10:39:00 AM

Massachusetts employers return to work this snowy Thursday to find that their Unemployment Insurance taxes increased by 33 percent yesterday. Happy New Year indeed.

Unemployment InsuranceThe automatic $500 million escalation for 2014 marks the sixth consecutive year that the commonwealth’s Unemployment Insurance system has triggered catastrophic rate increases. Lawmakers and Governor Deval Patrick have stepped in each year to roll back the hikes and freeze rates, but the persistent uncertainty and lack of meaningful reform have impeded the ability of employers to increase hiring and reduce a state jobless rate that is now higher than the national average.

Associated Industries of Massachusetts believes that the UI rate increase is unnecessary and economically imprudent. The Unemployment Insurance Trust Fund used to pay benefits to jobless residents showed a balance of $800 million in November with no sign of an economic downturn. We urge lawmakers to freeze rates again before employers make their first payments for 2014 at the end of the first quarter.

It is clear to anyone who follows Unemployment Insurance that the antiquated and expensive Massachusetts system needs structural reform. Legislative leaders discussed in October the possibility of linking UI reform to a bill increasing the state minimum wage, but no concrete proposal has yet emerged and the prospect of real reform now appears in doubt.

Reforming the UI system so that Massachusetts provides six months of standard benefits instead of seven and employees are required to demonstrate a longer attachment to the workforce to qualify for benefits appears, once again, to be too difficult for Beacon Hill.

Reform, Massachusetts style, appears to take the form of increasing the total revenue collected from business and reallocating who pays instead of changing the system to align it with competitor states.

Add the UI rate increase to other Massachusetts-only costs - a proposed highest-in-the- nation minimum wage, highest-in-the-nation health care costs, and labor policies that harm innovation and business formation - and it’s no wonder we continue to lose middle-class jobs. Employers are being priced out of Massachusetts one cost at a time by policies that other states do not impose on their economies and from which capital-mobile enterprises are all too happy to flee.

We encourage AIM member-employers to contact their elected officials to demand an Unemployment Insurance rate freeze and real reform. Both measures can, and should be accomplished before UI tax bills go out in late March.

Topics: Massachusetts Legislature, Unemployment insurance, Massachusetts employers

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