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Gathering Place
Tim Lyons,
Bette Tatum and
Carol Pregill

Thursday, March 24, 2005

Lower unemployment tax
would boost isle economy

One of the most important pro-jobs proposals in the Legislature involves reducing the burden of unemployment taxes in Hawaii. A bill submitted by Governor Lingle would allow employers to keep an estimated $200 million they otherwise would have to pay into the state's unemployment trust fund. This money could be used instead to increase wages, add benefits and create more job opportunities in Hawaii.

Hawaii has had the lowest unemployment rate in the nation for six of the past seven months, building on low unemployment levels for the last two years. As a result, $400 million has accumulated in the state's unemployment account.

Rather than continue to collect these funds that will sit idle in the state coffers, the governor's proposal would allow employers to use the $200 million more that would accumulate into that fund during the next three years to improve their companies and acknowledge employee efforts.

Hawaii's current unemployment income tax applies to the first $32,300 of every worker's total wages. This is the highest in the country. And in Hawaii the wage base goes up every year, whether needed or not. Federal law sets the wage base at a minimum of $7,000. The national average wage base is $12,620. In fact, 30 of the 53 states and territories (57 percent) assess employers a UI tax only on the first $10,000 of salaries earned by workers. The bill proposed by the Lingle administration (Senate Bill 815/House Bill 706) would lower the taxable wage base in Hawaii to $7,000 for the next three years (2005, 2006 and 2007). At the end of the three years (January 2008), a financial assessment would be done to see if the wage base needed to be adjusted based on the unemployment levels in our state.

In the interim, businesses both large and small could use the money they would have paid into the fund to improve their businesses and reward their workers. This infusion of $200 million into the state's economy could be done without costing the state a single cent!

Ironically this common-sense, logical reduction of an overly burdensome tax has been unnecessarily tacked onto a bill to increase the minimum wage. This good idea may die if it continues to be entangled in the minimum wage dispute. We urge our fellow business friends to ask the House to consider the administration's idea on its own merit and decouple it from controversial proposals to change minimum wage laws.

It's time for our lawmakers to take an easy, simple step of providing immediate, significant relief to businesses throughout our community. It's good for the employer. It's good for the employee. And it's very good for our economy. Call or write your legislator today.

Tim Lyons is executive vice president of the Hawaii Business League. Bette Tatum is the state director of the National Federation of Independent Business. Carol Pregill is president of the Retail Merchants of Hawaii.

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