Legislation calls for no tax on jobless checks while holding the line on contributions to unemployment fund

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Lawmakers and Gov. John Carney unveiled a proposal Monday that would provide additional relief to tens of thousands of Delawareans who have lost their jobs during the COVID-19 pandemic.

Sponsored by Rep. Ed Osienski, (D) Newark-Brookside and Sen. Jack Walsh, (D) Stanton, House Bill 65 would exempt unemployment benefits paid in 2020 from Delaware state income tax, maintain the new employer unemployment tax rates at 2020 levels, and waive the 13-week waiting period before the state could trigger on extended benefits.

“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, the lead sponsor of 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 – more than 100,000 – filed for unemployment, with the state Division of Unemployment Insurance paying benefits of more than $965 million in 2020, compared to about $67 million in 2019. Although the unemployment rate has fallen in recent months, thousands of residents are still unemployed. Although Congress recently extended benefits from the CARES Act, officials have been exploring ways to provide assistance.

“In the past year, we have significantly expanded unemployment benefits to support Delaware workers and families who have been hit hardest by the Covid-19 crisis. We shouldn’t then turn around and tax workers on that income,” said Carney. “That’s why I’m pleased to make this bill a priority when we return to legislative session this month. Thank you to members of the General Assembly for their partnership in supporting working Delaware families.”

Exempting unemployment benefits from state taxes would keep $21 million in the bank accounts of the more than 100,000 Delawareans who filed for unemployment last year.

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

HB 65 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 and implement federal programs providing unemployment benefits to respond to the pandemic. The General Assembly granted this authority, but it is slated to expire at the end of March. HB 65 would extend this authority until March 2022.

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 in order to avoid an increase in these rates as a result of the increase in unemployment claims due to Covid-19. The assessment is made to finance the state’s unemployment insurance system.

Maintaining the new employer tax rates at 2020 rates is expected to benefit more than 2,000 businesses. Holding the new employer tax rate at 1.8 percent will save employers up to $264 per employee in 2021. Holding the new construction employer tax rate at 2.3 percent 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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