Jobless Claims Tax State, But Not Yet Employers

With hundreds of thousands of Wisconsin citizens out of work due to the COVID-19 crisis, the state’s fund for jobless benefits has paid out hundreds of millions of dollars in a matter of months to cover historic unemployment claims. Nevertheless, the combination of higher fund reserves at the start of the pandemic and state action in response to it should push any broad payroll tax increases for employers into early 2022 – a benefit for both struggling businesses and workers.

After adding to its unemployment fund substantially in recent years, the state is once again seeing those critical reserves decline at an unprecedented pace. State and federal figures show the balance in the state unemployment fund has fallen from nearly $2 billion at the close of 2019 to $1.66 billion as of June 8, a drop of more than $300 million that occurred almost entirely since the beginning of May.

So far, public attention has justly focused more on the plight of unemployed workers. Yet it’s also worth considering the impact of falling unemployment fund balances, since those can lead to tax increases on employers during an already brutal downturn. Fortunately, in part due to recent state actions, it appears taxes on businesses will not rise widely until the first quarter of 2022.