Message From Ben: SUTA Tax Increase Update on Leg Opening Day


Today is Inauguration Day and the opening day of Hawaii’s legislative session.

Lawmakers across the nation have a lot to address but we look forward with hope and optimism for what’s to come in the New Year.

As we watch what’s happening nationally, we must not lose sight of key local issues too. One of the biggest items that needs our immediate attention are unemployment (SUTA) tax increases.

If the legislature intends to prevent a 300% SUTA increase, a Bill must be fast tracked and passed through the legislature and signed by the Governor by the end of February.

Therefore I’m writing to you today to keep you informed and to ask for your immediate help as well.

Why is this happening?

As you may remember from my earlier email, by law, Hawaii must raise unemployment taxes to replenish our state unemployment Trust Fund when it has been depleted.

Unless our lawmakers change the law, the tax rate schedule will increase from Schedule C to Schedule H in 2021 and rates could triple for some employers. This is the situation we face today.

Today the real work to reduce the tax burden on our business community truly begins.

Our stance on unemployment taxes

We have learned that the Ige Administration is contemplating introducing a Bill that lowers the rate schedule from Schedule H to Schedule E…but this isn’t low enough.

At ProService, we're advocating that the Bill be amended and the Schedule be held at Schedule C for at least 2 years.

Why? We have three main arguments.

First, small businesses cannot handle a steep SUTA increase.

A local business with 5 employees could pay an extra $7,000 in SUTA taxes if rates are increased to Schedule H. This will create disincentives to hire employees, slow business recovery, and in their weakened state, many more businesses will shut their doors or lower local employment for good. Employers have been hit hard enough already.

Second, the government cannot fairly hold employers solely responsible for replenishing the trust fund.

Our unemployment system was originally designed to be 100% funded by employers to provide wage benefits to those unemployed who were between jobs as a result of business decisions. The pandemic and the ensuing shutdowns were not business decisions. The mass shutdowns were societal decisions responding to an unforeseen catastrophe. Moreover, the unemployment system has become a mechanism to deliver economic relief to the population of Hawaii, much like social security…and it is entirely unfair to ask employers alone to foot the bill.

Third, our lawmakers need to look for other ways to replenish the trust fund outside of tax hikes on employers. We must work with our congressional delegates to ask the federal government for relief, using more CARES funds to pay down federal loans, or issue government bonds and spread out the timing and the source of repayment. Everyone is responsible, not just employers.

Let’s fight this together

At ProService, we’re prepared to work tirelessly on your behalf.

In the coming days, we’ll track the SUTA and other bills that impact your business and notify you when a SUTA bill is scheduled for hearing so you can take an active role in ensuring our lawmakers hear your voice.

But we’ll need your help.

When a SUTA bill is up for hearing, we’ll need you to submit a written testimony online, or virtually testify at the hearing.

We need your voice to tell our government leaders that:

  • Businesses cannot handle a steep tax increase
  • Lowering the tax rate to Schedule E is not low enough
  • Schedule C for at least 2 more years will make recovery more realistic
  • Employers cannot be relied upon as the only means to replenish the trust

If you’re interested and committed, click here to let us know and we’ll alert you of key dates and how to submit a testimony or testify when the opportunity arises.

All hearings will be virtual this year which means that it will be much easier and less time consuming to ensure your voice is heard.

Concluding thoughts

Let’s team-up and take action. We highly encourage you to join our advocacy efforts and make your voices known.

Then, once the rate schedule is finalized in March, our team will share your new rates and its impact on you.

Thank you for your continued partnership as we chart our course together in 2021.

With Aloha,

Ben Godsey