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Connecticut Governor Signs Unemployment Tax Relief Order

Posted on Apr. 15, 2020

Connecticut Gov. Ned Lamont (D) has issued an executive order aimed at protecting employers from tax increases linked to COVID-19-related unemployment claims.

The April 9 order alters the state code to temporarily prevent “an employer's state unemployment tax experience rating from being increased, provided layoffs are linked to the COVID-19 pandemic,” according to a summary from the Connecticut Business and Industry Association.

The experience ratings are used to determine the per-employee tax that businesses pay toward the state’s unemployment trust fund. Businesses pay higher tax rates if more of their workers end up unemployed, and lower rates when turnover is low.

In an April 13 tweet, Jared Walczak of the Tax Foundation praised Lamont’s order and urged other states to follow. He said basing the tax rate on such experience ratings would make sense in normal times, “but with businesses mandated to shut doors, it’s an arguably unfair and potentially damaging burden.”

“Many small businesses, in particular, are struggling to survive,” Walczak said. “The last thing they need is a tax increase that makes it harder for them to ramp back up and rehire workers as soon as public health permits. This order recognizes and addresses that.”

The order changes section 31-225a(c)(1) of the state code to provide that “no base period contributing employer's account shall be charged with respect to benefits paid to a claimant due to partial or total unemployment that the Commissioner of Labor or his designee determines are attributable to COVID-19, including but not limited to benefits paid to a claimant who, through no fault of his or her own, becomes either partially or fully unemployed during the public health and civil preparedness emergency declared on March 10, 2020, and any period of extension or renewal.”

Noting that Connecticut's unemployment compensation trust fund was facing solvency issues before the pandemic, the Connecticut Business and Industry Association said that "the legislature also must finally act and reform the state's unemployment fund to mitigate precarious situations such as the current crisis."

"While the governor's executive order offers temporary and welcome relief for many businesses, employers may face experience rate consequences after six months unless the legislature takes additional action," the association said. 

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