Idaho business leaders say they are generally happy with the unemployment insurance tax cut Gov. C. L. “Butch” Otter signed into law on Jan. 31 — the first bill of the 2018 session – but some wish the state had used the money for workforce development instead.
Unemployment insurance is money that businesses pay to fund what people get when they’re out of work. The tax cut is expected to save employers $115 million over the next three years by reducing a how Idaho calculates the unemployment insurance tax rate. Idaho lawmakers were supposed to make the reduction last year. However, the bill was hijacked by legislative leaders who wanted to use the proposal as leverage for other tax cuts and in the end, the bill never made it to Otter’s desk for his signature.
Passing the bill this session was a “top priority” for the Boise Metro Chamber of Commerce, said Bill Connors, president and CEO. “This was unfinished business from last session,” he said. “All businesses, large and small, benefit. I have not heard any business tell me they don’t want the relief provided in this change,” adding that a small business of 25 people would save almost $3,000 a year.
“For a small business, any tax cut is a good thing,” said Sylvia Hampel, president of Clearview Cleaning Service Inc., in Boise. With its almost 400 employees, the company will see a savings of $8,000 to $10,000 a year, she said.
Former Commerce Secretary Jeff Sayer
“In the service industry, especially the janitorial business, we rarely get raises from our clients,” Hampel said. “Those contracts automatically renew year after year. It’s hard for us to even get a cost-of-living adjustment.”
Consequently, that makes it hard for Hampel to give her employees raises, even to employees who have been with the company eight or nine years, she said. The unemployment insurance tax cut meant she was able to give raises to five supervisors and a number of other staff members. “It’s a big help for us, because we can pass it through to our employees,” she said.
Companies can also use the money to help hire new staff, said Jay Larsen, president and CEO of the Idaho Tech Council, in Boise. “My understanding is this will save a business on the average of $118 per employee,” he said. “What companies usually do with savings like this is to see how these funds can help the company grow and develop. For instance, several of the tech companies are looking for aggressive growth and are hiring talent internal and external to Idaho. Many of these companies will utilize these dollars to bring more talent to their company.”
Not everyone was happy. “I’m always in favor of reducing the cost of doing business in Idaho, but this decision is disappointing,” said Jeff Sayer, director of the Idaho Department of Commerce from 2011 to 2016. Sayer is now putting together Rectify, a Treasure Valley consulting business to provide advisory services to mid-market companies.
“The original idea was the brainchild of Ken Edmunds and his team at Labor. It was developed four years ago to fund an innovative strategy described by his national peers as ‘one of the best ideas they had ever seen,'” said Sayers of the discussions that led to the insurance tax cut.
“His strategy would have created direct partnerships with Idaho companies, accelerated the skilled workforce they need to grow their companies and would have still produced an $80 million tax cut. Those partnerships would have created considerable returns to Idaho’s economy for years,” Sayer said. “Instead, the governor chose to forgo accelerating workforce solutions and raced straight to tax cuts. Those cuts, when diffused across all employers, will provide enough money to buy each employee a ticket to the movies.”
Some companies, such as Idaho Power and Power Engineers, said they were still evaluating the effect of the unemployment insurance tax cut. Nonprofit companies such as St. Luke’s Health System said they weren’t affected by the change.