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Bipartisan bill would waive state tax on 2020 unemployment benefits

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The Delaware Legislature returns to session on Tuesday, Jan. 12.
The Delaware Legislature returns to session on Tuesday, Jan. 12.

 

A proposed bill would exempt 2020 unemployment benefits from income tax in Delaware, among other things.

House Bill 65, sponsored by Rep. Ed Osienski, D-Brookside, and Sen. Jack Walsh, D-Stanton, would also keep new employer tax rates at the same levels as 2020, and waive the 13-week waiting period before the state could extend unemployment benefits.

Gov. John Carney also supports the bill.

Rep. Danny Short, R-Seaford and minority leader in the House, declined to comment on the bill and pointed out that it has bipartisan support. Also signed on as cosponsors are Rep. Ruth Briggs King, R-Georgetown; Rep. Mike Smith, R-Pike Creet; and Sen. Dave Wilson, R-Milford.

 

The 151st General Assembly begins Tuesday.

The point of the bill would be to help the 100,000-plus Delawareans who lost their jobs during the COVID-19 pandemic.

It’s expected to save workers $21 million. That could have an effect on estimates about revenue the state expects to bring in during 2021.

Projections now show a several hundred million dollar surplus. Several times during the December meetings of the Delaware Economic and Financial Advisory Council, members talked about how they believed many people on unemployment were going to be surprised at the big tax bill they faced as a result.

 

“Thousands of hard-working Delawareans have lost their jobs during the past year through no fault of their own. We owe it to those impacted by the pandemic to take whatever action we can to ease their burden,” said Osienski in a press release about the bill.

“Exempting the unemployment benefits that have been a lifeline to so many families will mean that they aren’t blindsided when they file their state taxes this year, and we’re also taking steps to protect businesses so they aren’t penalized with higher taxes during the pandemic.”

During the past year, a record number of Delawareans filed for unemployment with the state Division of Unemployment Insurance paying benefits of more than $965 million in 2020, In 2019 it paid $67 million, a press release said.

Although the unemployment rate has fallen, thousands are still unable to find a job. Congress recently extended benefits but officials say they want to do more for those affected.

 

“We shouldn’t then turn around and tax workers on that income,” said Carney in the press release. “That’s why I’m pleased to make this bill a priority when we return to legislative session this month.”

Last week, the Unemployment Compensation Advisory Council, which Osienski chairs, recommended the changes incorporated into HB 65.

The bill also would extend the Department of Labor secretary’s ability to issue emergency rules amending the Delaware Unemployment Insurance Code to deal with the effects of COVID-19. The secretary was giving that ability, but it expires at the end of March. HB 65 would extend the authority until March 2022.

“Delaware’s unemployment insurance program is one of our main tools we have for helping workers affected by the COVID-19 pandemic keep food on the table and a roof over their heads,” said  Walsh in the press release. “Taxing that income now would undo the very benefit we are seeking to provide them.”

 

The measure also establishes the 2021 new employer assessment rate, average industry assessment rate, and average construction industry assessment rate at the same rate as 2020. That should benefit more than 2,000 businesses, the press release said.

Holding the new employer tax rate at 1.8% will save employers up to $264 per employee in 2021. Holding the new construction employer tax rate at 2.3% will save employers up to $165 per employee in 2021, according to the Division of Unemployment Insurance.

HB 65 has been assigned to the House Administration Committee.

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