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Baker seeks relief for employers on unemployment insurance taxes

Governor Charlie Baker on Wednesday.
Governor Charlie Baker on Wednesday.Nancy Lane/Pool

Governor Charlie Baker wants to spare employers a $1.3 billion increase in unemployment insurance taxes over the next two years and instead sell bonds to shore up the fund used to pay jobless benefits.

Baker said at a news conference Friday that his administration filed a bill with the Legislature that would keep contributions to the unemployment insurance trust fund on their current schedule. Without action, employer payments would jump by 60 percent in 2021, to an average of $866 per employee from $539, a change triggered by the trust fund’s deteriorating financial condition.

The legislation, if approved by lawmakers, would limit average payments to $635 in 2021 and $665 in 2022, providing “immediate and important relief to all businesses across the Commonwealth,” Baker said.

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Business groups have urged lawmakers to forgo the tax increase, as they have done in previous periods of high unemployment.

The Massachusetts unemployment rate fell to 6.7 percent in November, matching the national rate, the US Labor Department said Friday. The jobless rate dropped from 7.4 percent in October as payrolls increased by 12,200 jobs last month.

Massachusetts has added back more than half of the 690,000 jobs that disappeared in March and April during the pandemic-induced lockdown, and the unemployment rate has dropped from a high of 17.7 percent in June.

But the pace of job creation is down from earlier in the recovery, and jobless claims show continued layoffs as well as an increase in the ranks of the long-term unemployed. Some 3,400 jobs were cut in the government sector, bringing the loss over the past year to 30,100, a decline of 6.6 percent.

In another sign of weakness, the state’s labor force decreased by 43,900 to 3.58 million, as many people gave up looking for work and were no longer counted as unemployed.

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In February, before the pandemic forced the shutdown of most nonessential businesses, the Massachusetts unemployment rate stood at 2.8 percent, compared with 3.5 percent nationally.

The unemployment insurance trust fund faces an estimated deficit of nearly $5 billion next year caused by the spike in joblessness.

Massachusetts has borrowed $2.2 billion from the federal government to cover the shortfall, as payments of jobless benefits have far outstripped employer contributions. Baker wants to borrow from bond investors to pay back the US Treasury Department. If the feds aren’t made whole before November 2022, Massachusetts employers would be hit with what the administration called “punitive federal tax increases.”

Baker’s bill “seeks to address the critical and urgent issues that left unaddressed will impose a significant tax increase on the struggling Massachusetts businesses that are working so very hard to ensure their employees have a good paycheck and strong benefits,” Brooke Thomson, executive vice president of Associated Industries of Massachusetts, said in a statement.

The federal loans were interest-free this year, but that’s about to change. Interest begins accruing in January and must be paid starting in November. The state can’t use the insurance trust fund for those payments.

Baker’s bill would establish a surcharge on employers to cover the interest payments, though Congress could decide to waive them.

“While [Baker’s bill] will provide much-needed relief to small businesses, longer term, the state’s UI system still needs additional review and reform,” the Greater Boston Chamber of Commerce said in a statement.

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Congressional negotiators continued to struggle Friday to reach agreement on a stimulus package that would extend federal unemployment programs that run out next week.

Some 477,000people in Massachusetts face a Dec. 26 cutoff of the federal benefits, according to a report last month by the Century Foundation.



Larry Edelman can be reached at larry.edelman@globe.com. Follow him on Twitter @GlobeNewsEd. Amanda Kaufman can be reached at amanda.kaufman@globe.com. Follow her on Twitter @amandakauf1.