Editorial: Unemployment tax break needed in Hawaii

State and federal officials have worked for the past year to help as many businesses as possible stay upright. It would make no sense to slap them down with an enormous tax bill the moment they emerge into what they hope will be the waning days of the coronavirus pandemic and economic crisis.

But that is what would happen unless House Bill 1278 is enacted, as it should be, with a stroke of Gov. David Ige’s pen.

Lawmakers from both chambers collaborated with the administration on drafting the measure, which passed and was sent to the governor on Monday. State Rep. Richard Onishi, who chairs the House Labor and Tourism Committee, said the final form differs little from the bill Ige submitted.

That’s why Onishi’s counterpart labor chairman, state Sen. Brian Taniguchi, said he’s “pretty sure” it will go through, saving businesses from excruciating increases in the tax that replenishes the state’s unemployment insurance fund.

Sherry Menor-McNamara and Ryan Kusumoto, the respective CEOs of the Chamber of Commerce Hawaii and Parents & Children Together, offered chilling figures of what their business and nonprofit members would face.

The average tax increase would be 260% for nonprofits, Kusumoto said. In surveying businesses, Menor-McNamara said, stories of companies anticipating annual tax markups in the $7,000-$85,000 range were typical.

The new law would save businesses and nonprofits from all but a modest increase, calculating the rate at the midrange level rather than the top rate that would have applied in the case of a tapped-out fund.

Ige surely is watching the goings-on in Washington, D.C. Hawaii already has borrowed $700 million in federal dollars to keep unemployment benefits flowing, and he’s hoping for help in shaving off that debt.

There is reason to anticipate a healthy infusion of unemployment state funds in the newest round of federal pandemic relief. The impact has been felt in many states. According to the White House Council of Economic Advisers, nationally this has been the 49th week of recordbreaking numbers of workers applying for unemployment benefits, so there’s empathy on this front in Congress.

Still, recovery may be slow, so increasing the tax draw on businesses will have to be gradual. Long-term, borrowing is a crutch, but Hawaii can expect its ailing economy will be limping along for at least a few years.