BOSTON (SHNS) – Massachusetts House unanimously approved sweeping tax relief, paid emergency sick leave and an unemployment system funding bill that would moderate increases in UI premiums on Thursday that are expected to hit businesses in the coming weeks.
Laid-off workers and employers both have access to tax breaks under the Bill (H 89), which is based on a proposal by Governor Charlie Baker to stabilize the state’s unemployment system and also includes provisions such as creating a paid sick leave program for employees affected by COVID-19 and tax breaks on any paycheck protection program loans canceled from 2020.
The bill would freeze a rate schedule, imposing smaller increases in unemployment taxes that businesses pay in 2021 and 2022. It would also allow $ 7 billion in borrowing to maintain the solvency of the depleted unemployment fund and repay federal loans; and impose a separate surtax on businesses. to cover federal interests.
House Speaker Ron Mariano told reporters after the bill was passed that “the thrust of the bill is still to get people back to work.”
“We are trying to help small businesses get back on their feet,” Mariano said. “The more money we can keep in and under the control of small business owners, the better off we’ll all be. This allows them to hire more people with the rate freeze, the P3 stuff forgiveness allows them to conserve capital. All of this is used to rehire employees. “
The House vote 155-0 in favor of the bill. Four lawmakers – Republican Representatives F. Jay Barrows of Mansfield, Angelo D’Emilia of Bridgewater and Donald Wong of Saugus as well as Independent Representative Susannah Whipps of Athol – voted present.
Senate leaders expect to consider the bill next week and have already indicated their support.
The state’s unemployment system is funded by contributions from companies, which can increase depending on how often an employer’s workers seek help.
COVID-19 and the widespread changes in public life it brought about created a tidal wave of unemployment, reaching an unemployment rate of 17.7% statewide last June. The demand wiped out the UI trust fund, which fell from a balance of $ 1.6 billion in February 2020 to $ 2.2 billion in the red by the end of the year.
In his most recent monthly report, the State Department of Unemployment Assistance has forecast that the trust fund will show year-end deficits of $ 4.7 billion in 2021, nearly $ 5 billion in 2022, $ 4 billion in 2023 and $ 2.9 billion in 2024.
The dire outlook is expected to trigger a change in the tax rate schedule that, without action, would push companies’ average cost per employee from $ 544 in 2020 to $ 866 in 2021, a jump of nearly 60%.
The legislation would freeze the rate schedule in 2021 and 2022, setting the average cost per employee at $ 635 in 2021 and $ 665 in 2022, according to the Associated Industries of Massachusetts.
It would also allow the state to bond up to $ 7 billion to maintain benefits and repay the more than $ 2.2 billion available to the state. borrowed federal government for unemployment so far.
Interest rates on municipal bonds are lower than the 2.27% rate that will be due on federal loans, and supporters say the move will save Massachusetts money in the long run.
“Although unemployment has declined, certainly from what it was in June of last year, we still have challenges to face, and backing this money will give us some flexibility not to have it all. put it on business immediately, ”said Aaron Michlewitz, chairman of the House Ways and Means Committee.
Businesses would also face a new surtax, in the form of an excise tax on employee wages, until December 2022 to help pay off interest owed in September on federal loans. Representative Josh Cutler, co-chair of the Labor and Workforce Development Committee, told the News Service that the supplement will result in an average cost of $ 57 per employee in 2021 and $ 66 per employee in 2022.
“Even with this additional surcharge for employers, Massachusetts businesses will save money with our action today,” Cutler, a Democrat from Duxbury, told the House.
The bill also includes several other important articles.
It would create a tax credit available to those who have received unemployment benefits and whose household incomes are below 200% of the federal poverty line, and remove penalties for any missed tax payments on those benefits. last year. The total tax credit is $ 30 million for the 2020 tax year and $ 20 million for 2021.
Businesses would also be exempt from paying state taxes on canceled federal paycheck protection program loans, a step Republican lawmakers have highlighted in recent weeks as a significant relief.
“When many companies applied for PPP loans, they were surviving. They weren’t thinking about next year, ”Michlewitz, a Democrat from the North End, told reporters. “They weren’t thinking about the tax decision they would have to make in the future. They were thinking about how they would stay open in the midst of an economic shutdown. In order to protect these small businesses and get them back to where they were, in the short and long term, loan forgiveness here and tax relief here is an appropriate step to take.
A year after the start of the pandemic, the House included language creating a COVID-19 emergency paid sick leave program in the bill, providing benefits to employees who contract COVID-19, to be implemented. quarantine or have to care for a family member affected by the disease.
Full-time workers could access 40 hours of paid time off, while time off for part-time workers would vary according to their schedules. Employers with fewer than 500 workers can access federal tax credits to help cover costs.
Before approving the bill, the House rejected an amendment proposed by Representative Erika Uyterhoeven of Somerville that would have offered two weeks of COVID-19 leave to affected employees.
Members also voted 152-4 to tear down another Uyterhoeven amendment aimed at what she described as preventing “double dip” tax breaks for companies that have received PPP loans.
Baker first tabled a version of the bill that included only UI changes in December, then resubmitted his proposal in January with the start of the new session. Large business groups such as AIM and the National Federation of Independent Businesses supported This measure.
“By passing this law, we will be able to use a much cheaper funding mechanism to borrow money and repay the fund,” Baker said of the bill on Wednesday.
The Republican governor has not taken a public position on the sections that Democratic leaders have added to the package, such as COVID-19 emergency paid sick leave or tax credits for the unemployed.
The House vote came after Senate Republicans delayed action on a revamped climate bill, saying passage of the relief bill to prevent the taxation of PPP loans should ” take place immediately ”before any further questions.
“In the absence of action by the legislature, these businesses will be forced to pay substantial amounts of additional taxes through tax returns now due on March 15, rather than putting those dollars to work in their fight for survive and continue to employ the thousands of Massachusetts residents. The payroll protection program was designed to protect, ”wrote Sen. Bruce Tarr of Gloucester, Ryan Fattman of Sutton and Patrick O’Connor of Weymouth. “Failure to act in a timely manner will cause untold hardship for Massachusetts employers and employees. “