Vermont employers are facing three different but related UI tax threats:
- The first is the automatic increase in UI taxes currently scheduled for July 1 that would be the system’s response to the significant losses to the UI Trust Fund owing to the COVID crisis. For most employers, this would more than triple the tax rate they are paying for UI, and even employers who already pay higher rates because of poor experience ratings would see increases of 60% and higher.
- The second is a proposed one year, 20% increase in benefits that would start July 1 and could cost over $35 million. This cost would add to higher UI taxes on employers over the coming years.
- The third is the very significant impact of the 2020 losses driving up required Trust Fund levels. The system gears Fund reserves and the taxes required to support them based on the most costly year in the past ten years. If 2020, which was far more costly than any realistic recession in the foreseeable future, is allowed to drive this goal, employers will pay hundreds of millions of dollars in unnecessary tax increases over the next ten years.
The following steps are needed to address these threats in the context of S.10, legislation currently before the Senate Economic Development, Housing, and General Affairs Committee, and employers are strongly encouraged to contact legislators to do the following:
- Support the proposal by the Administration to freeze the UI tax rate schedule for one year and limit the amount tax rate schedules can change in any one year moving forward. This will defer the tax increases needed to replenish the Trust Fund but not eliminate them – it would avoid the significant tax shock currently due starting July 1, but it will require relatively higher taxes in future years to still repay the Fund over a longer period of time.
- Oppose the proposal by Senate Economic Development Committee Chair Michael Sirotkin to provide a one year, 20% increase in UI benefits. The federal government has already provided very high bonus payments on top of state benefits and is expected to continue to do so through this crisis. This proposal to arbitrarily increase state benefits could cost employers an additional $35 million over the coming years and could end up going mostly to individuals who are not unemployed because of COVID.
- Include provisions to remove 2020 from the calculation of Trust Fund target reserves. Although this issue has been discussed, there has not been a proposal put forward to address this in S.10 to date. This would be a significant step toward avoiding over taxing employers in the years ahead, although some additional reforms might also be necessary in the future.
For more background and other information about these three threats and the proposed responses outlined above, as well as any other questions about Vermont’s UI system and related issues, please contact us at email@example.com.
As noted above, these issues are being discussed in the context of S.10, legislation originally introduced to address extensions of certain temporary COVID related UI provisions, which is before the Senate Economic Development, Housing, and General Affairs Committee. The Committee is expected to act on S.10 after the Legislature returns from the Town Meeting Week break next week, possibly acting on it by March 12. If the bill passes the Senate, it will be referred to the House Commerce and Economic Development Committee.
It will be important to contact Senators, particularly those on the Senate Committee and in leadership, in the coming days. In addition to contacting your own Senators and the members of the Committee and Senate leaderships below, please feel free to contact us at firstname.lastname@example.org to discuss other options for engaging on this issue.
To identify and contact your own Senators, click here.
Senate Economic Development Committee Members:
Senator Michael Sirotkin (Chair) (Chittenden County)
Senator Alison Clarkson (Vice Chair) (Windsor County)
Senator Becca Balint (Windham County)
Senator Randy Brock (Franklin County)
Senator Kesha Ram (Clerk) (Chittenden County)
It should be noted that Senator Balint is also the Senate President Pro Tempore, Senator Clarkson is the Majority Leader, and Senator Brock is the Minority Leader.