A new report predicts that Massachusetts may have to require small businesses to pay a nearly 60% increase in unemployment insurance taxes starting next year, as the state program's trust fund faces a $2.4 billion deficit after demand for unemployment benefits reached record heights during the coronavirus pandemic.
The report, published by the state's Executive Office of the Department of Labor and Workforce development and the office of Unemployment Assistance, projects that Massachusetts may have to raise taxes on employers by as much as $319 more per qualifying worker.
The tax hike, slated to start in April 2021, also comes as many small businesses have taken a hit during the pandemic.
The $319 is the "average per employee contribution required," according to the report. The amount required in 2020 is $539 per employee, which will jump to $858 in 2021.
The report focused on projections through the 2024 outlook period. It shows the unemployment insurance tax amount increasing to $913 in 2022, $917 in 2023, and $925 in 2024. If that becomes the case, businesses will be looking at taxes increasing by almost $400 in just a few years.
Massachusetts currently has an unemployment rate of 16.1% — the highest in the nation.
Christopher Carlozzi, the Massachusetts state director of the National Federation of Independent Business, said the unemployment insurance tax increase could further stall an economic recovery and the creation of new jobs.
“With small businesses, it has to be affordable to create those jobs. And when taxes like, UI taxes are going to go up significantly as outlined in the plan, that becomes problematic and could hinder job growth,” he said.
Carlozzi said that an increase in the UI taxes could push many businesses to the breaking point. He said he is calling on state lawmakers to hold the rate increases, review eligibility requirements and overall unemployment benefits to ease the burden on small businesses.
“Something needs to be done about it in order to get these businesses to once again create jobs and grow, because right now they’re very skeptical, some are still waiting to reopen their doors,” he said. “When we're looking at a U-I trust fund deficit to the degree that we're looking at and trying to get these small businesses and encourage them to once again grow, it’s quite the crisis that's on the horizon for 2021.”