Senate Bill 5873 has passed both houses of the legislature and will provide a reduction in the unemployment taxes on small business.

The bill reduces the social tax component of unemployment taxes from 0.75% to 0.50%. In 2023, the maximum social tax is reduced from 0.80% to 0.70%. Starting in 2023, employers with 10 or fewer employees, as of the fourth quarter 2021, will have a graduated social tax factor capped at rate of 7%.

Washington is one of a handful of states that is requiring employers to pay increased unemployment taxes due to COVID-19. Despite the vast majority of states waving the requirement to replenish their unemployment trust fund accounts, Washington will only waive the increased repayment requirement if the business had a COVID-19 infection at the business site.

Legislation has been passed in the previous session to help small businesses impacted by the tax increases from the state to attempt to replace the unemployment fund balance depleted during the pandemic and fraud at the Employment Security Department (ESD). In some cases, ESD increased the taxes by as much as 700%.

The Washington Policy Center has released a detailed Policy Brief summarizing the problems with ESD and solutions for those problems. Some of these problems have been addressed by legislative action this year, but there is significant reform that is still needed.

ESD officials need to provide the public with more transparency into its internal policies, improve fund balance reporting accuracy, data timeliness and data availability. ESD needs to provide improved authentication and fraud protections against scams and individual fraudulent claims and needs reform to employer taxation policy and trust fund use.

In addition to ESD completing the current audits, continued, regular bicameral legislative oversight of ESD is required.

For all of the Washington Policy Center recommendations, read the full Policy Brief here.

SB 5873 passed with strong bipartisan support and will help reduce costs on small businesses.