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EDITORIAL

Business needs a break on unemployment taxes

Massachusetts lawmakers should make it a priority to pass Governor Baker’s bill by the end of the session.

Governor Charlie Baker has filed legislation aimed at saving businesses $1.3 billion over the next two years for their share of unemployment insurance taxes.
Governor Charlie Baker has filed legislation aimed at saving businesses $1.3 billion over the next two years for their share of unemployment insurance taxes.Sam Doran/Pool

Not every fix for the sagging economy comes from Washington.

One huge boost to businesses in Massachusetts can and should come from right here on Beacon Hill — that is, if House lawmakers can keep their focus.

A week ago, as House Speaker Robert DeLeo made news of his imminent departure public, Governor Charlie Baker filed legislation aimed at saving businesses $1.3 billion over the next two years for their share of unemployment insurance taxes. That’s no small chunk of change — and not only could it save money, but it could also enhance the prospect of companies growing (or at least not cutting) their workforces at a time when people desperately need jobs.

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Without the legislative action, employer payments into the unemployment trust fund would jump by 60 percent in 2021. That’s an average of $866 per employee from the current average of $539, when many businesses are struggling just to keep employees on payroll in the pandemic. Under the Baker bill, the per worker average rate hike would be a more modest 17 percent, or about $635 in 2021 and $665 in 2022.

“We could do this in January or February or March,” Baker said at a Dec. 18 news conference, “but if you want to send a really big and positive signal to employees and to people who are out of work and to employers, this would be an incredibly positive message to send because it limits the increase in unemployment exposure to workers and it also limits the hit financially that would be associated with employers come January.”

That anticipated hit to employers next year would be triggered by the yawning deficit in the unemployment trust fund caused by the pandemic and the subsequent rise in unemployment as businesses have shuttered — some of them for good.

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During the first 10 months of 2020, the fund paid out $5.3 billion — about $4.2 billion more than the previous year during that same period, according to state figures. As recently as last June, Massachusetts had the highest unemployment in the nation, at 17.7 percent. The November figures, released Friday, showed the figure had dipped to 6.7 percent, the same as the national rate.

But Massachusetts had borrowed about $2.2 billion from the federal government to keep the trust fund afloat. For the past year, that has been an interest-free loan. But all good things must come to an end and, come January, interest will begin accruing on that loan, payable next November — and, by law, that interest can’t be paid out of the trust fund.

Under Baker’s bill, the interest would be covered by a two-year surtax on employers. (The amount thus far is unknown.)

And because Baker is banking on being able to do better in the private bond market than by continuing to borrow from the federal government, he’s also looking for authorization to sell up to $7 billion in special obligation bonds to continue to keep the fund solvent.

Freezing the tax to spare employers hardship is hardly unprecedented. Governor Deval Patrick successfully urged lawmakers during the Great Recession to twice freeze scheduled rate increases for businesses.

Today, with employment numbers finally beginning to bounce back, it makes little sense to tax employers at an onerous rate for every new job they create.

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This is admittedly a stop-gap measure to assure the fund’s solvency during an unprecedented period of pandemic-driven economic upheaval. And, of course, there is always the hope that a Biden administration will be more amenable to providing aid to struggling states left out of the current stimulus package.

The issue among state lawmakers — as it so often is — is less about the merits of the bill than about the timing. Baker is right that businesses need predictability and that sooner is better than later.

So with a handful of working days left before the session ends Jan. 5, lawmakers will need to keep their eyes on that which is essential to the well-being of the Commonwealth, even as they scramble to assure the preordained line of succession as Speaker DeLeo leaves for the private sector.

This bill meets that test. It must stay on the 2020 end-of-year agenda.


Editorials represent the views of the Boston Globe Editorial Board. Follow us on Twitter at @GlobeOpinion.