Even with record unemployment, businesses likely won’t see higher payroll taxes until 2022, report says

Despite a more than $300 million drop in Wisconsin’s unemployment fund this year, businesses in the state will likely not see a widespread increase in payroll taxes until the start of 2022, according to a new Wisconsin Policy Forum report.

The report found that a combination of recent changes in state law and the strength of the unemployment fund heading into the coronavirus pandemic will likely prevent an increase in payroll taxes for many companies.

Wisconsin has paid out around $665 million in state benefit claims and other payments this year but has taken in nearly $353 million in taxes and other revenue. While the amount paid out is already more than any year since 2013, Wisconsin ended 2019 with nearly $2 billion in its unemployment trust fund.

For comparison, the state had around $235 million in the fund at the end of 2008.

Even with the sharp drop so far this year, the fund balance would have to dip below $1.2 billion by June 30 to trigger an increase in the tax rate. The report notes “that appears unlikely,” adding that recent legislation allows Gov. Tony Evers to use federal money to keep rates at their lowest level through the end of 2021.

Another component of payroll tax which generally leads to higher rates for employers with layoffs will also benefit from a recent change in state law. Instead of drawing on an employers previously paid taxes, unemployment claims caused by the public health crisis with benefits paid between March 12 and Dec. 31 will be charged to the state’s balancing account.

The Wisconsin Policy Forum report noted that it “made sense for state and federal officials to shield employers for the next year and a half from broad tax increases that could harm both their still vulnerable finances and their workers” given jobless claims were in many cases prompted by state and local orders limiting economic activity.

“State officials should keep this issue at the forefront in the year to come. The economy will remain fragile for some time and, though the unemployment fund will have to be replenished eventually, it will be crucial to do so in a way and at a time that does not unduly burden both businesses and vulnerable workers,” the report says.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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