Tax Relief

Unemployment tax relief invoice is warmly acquired | Standing

SALEM – Oregon companies, business lobbyists and lawmakers from both parties have blessed a bill that would allow some companies to defer part of their income tax for unemployment and pay slightly less to a reduced state trust fund in the years to come.

House Bill 3389, which the House Rules Committee heard on Thursday April 1, would also set wage tax rates for the next three years (2022 to 2024) at the 2020 levels set before the coronavirus pandemic closes led to a severe economic downturn. A. a year ago.

The shutdown and cut orders affected the 10 stores in Washington County and two in Clackamas County in the Kimberly Spiegelberg Barbers chain. Their wage tax rate was a relatively low 1.3% given the industry’s high turnover, but rose to 2.1% after the layoffs caused by the pandemic.

“The worst thing as an employer is that this rate stays with me for three years if nothing is done,” she testified.

According to Rep. Paul Holvey, a Eugene Democrat and one of the key lawmakers involved in drafting it, the bill would allow employers to defer $ 100 million this year. A lower goal for the state trust fund for unemployment would save them $ 2.4 billion in taxes over a decade. (Employees do not pay into the fund.)

“I think it’s something to realize that we’re doing what we can,” said Holvey, a retired union official. “We must be careful to avoid unintended consequences and understand that our efforts here and the numbers are estimates.”

The bill was also approved by the Oregon State Chamber of Commerce, the Oregon Restaurant and Lodging Association, the Oregon Business & Industry, and the National Federation of Independent Business / Oregon.

Some of these lobbyists also suggested that lawmakers go further, letting some companies defer even more of their 2021 payroll taxes than the bill allows, or using a portion of the state’s $ 780 million share of federal aid A one-time wage tax offset is available as part of President Joe Biden’s pandemic recovery plan.

Acting director David Gerstenfeld of the Oregon Employment Department, whose staff were consulted as the bill was drafted, said officials are awaiting guidance from the US Treasury Department on how to ban the use of federal funds for state tax cuts. Gerstenfeld said the bill, as drafted, raised no objections from the U.S. Department of Labor, which oversees state unemployment systems.

What the bill does

The bill does these things:

• Companies can defer paying up to a third of their 2021 wage tax until June 2022 when their tax rate has increased by half a percentage point.

• The wage tax rates for 2020, which were set a year ago before the outbreak of the pandemic, would be the basis for the tax rates in 2022, 2023 and 2024.

• The labor office would base its state trust fund payroll tax collections on a 20 year horizon rather than the current 10 years, and the target would be lower. The state trust fund was $ 5 billion at the start of the pandemic. it’s about $ 3.7 billion now. The agency paid out a total of $ 8.4 billion in benefits last year, but much of that came from federal funding. Just over $ 700 million went to 100,000 self-employed and gig workers in Oregon who were ineligible for benefits until Congress passed the CARES Act last year.

Oregon was one of the few states that did not borrow from the federal government to pay unemployment benefits a decade ago during the Great Recession. Gerstenfeld said he did not expect the state to have to take out loans this time; Employers would pay back the higher costs and interest through higher wage taxes.

balancing act

“This bill strikes a balance between short-term relief – some targeted relief for the companies that saw the biggest hike in tax rates – and some long-term adjustments that we believe the trust fund can survive,” he said. “We are very careful to ensure that any adjustment over time puts overall solvency at risk.”

No one testified against it at the hearing, although the committee received a statement from Tom Cusack of Lake Oswego, who writes the Oregon Housing Blog and is soliciting more information on the basis of the bill.

The bill was instigated by Democratic lawmakers and drafted by five lawmakers, including the Democratic chairmen and leading Republicans on the business and working committees of the House and Senate.

Republican Daniel Bonham, a The Dalles Republican and small business owner, said his initial proposal was to freeze wage tax rates at 2019 levels. He admitted that he and his colleagues were looking to relieve corporate burdens by considering other factors focused.

He said his participation in the small group made him feel his concerns were being heard in a house where Democrats have a 60% majority.

“I threw out a few bad ideas that were dismissed,” he said. “We talked about why they were bad ideas and came up with a different concept of how we can move forward.

“I really like where we ended up. I think it compromised.”

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