Job Killer Bill Increasing Unemployment Insurance Taxes Stopped
A California Chamber of Commerce job killer bill that would have hiked unemployment insurance (UI) taxes failed to meet a key deadline on Friday and is dead for the year.
The bill, SB 1434 (Durazo; D-Los Angeles), had until Friday, April 26, to make it out of its first policy committee and failed to do so.
SB 1434 increased UI taxes to fund UI benefit hikes of up to 55%, as well as providing for subsequent increases based on inflation. It also created an entirely new UI program to provide benefits to workers who do not qualify for traditional UI, to be funded by a new tax on California employers.
The CalChamber conservatively estimated the bill’s proposed changes would have resulted in more than a 200% increase in UI-related taxes for all California employers.
Massive Tax Increase
SB 1434 was disguised as reform to California’s UI program, but the changes it proposed would have increased the drain on the UI Fund, which has a current deficit of $20.7 billion.
SB 1434 would have increased California’s maximum weekly benefit by 55.6% for claims filed in 2025, and then provided for continual upward adjustments beginning in 2026 based on inflation. The bill also altered the calculation of benefits award to increase the number of workers who qualify for maximum benefits. It also increased the benefits for workers who hold two jobs but lose one, by increasing California’s “earnings disregard” by 100%.
Cumulatively, these changes would have resulted in massive increases in benefits and would have necessitated massive increases in taxes on California’s employers. The bill implicitly acknowledged that it would require considerable tax increases on California employers to fund these massive benefit increases.
In addition to increasing costs to California’s UI Fund, SB 1434 would have created a new “Excluded Workers Fund” based on an additional 0.5% tax on the taxable wages of California employers to fund this new program.
To give a sense of scale of the tax increase SB 1434’s “Excluded Workers Fund” would have necessitated, below is a rough estimate:
Based upon Department of Labor statistics, California has roughly 18.3 million employees. Assuming employers pay UI taxes on a taxable wage base of $7,000 (present law, not SB 1434’s proposed change), a 0.5% tax increase would result in an aggregate tax increase of $640 million. However, one must then likely double or triple this estimate because SB 1434 is all but certain to include a massive increase in California’s taxable wage base. For that reason, the CalChamber conservatively estimates that the “Excluded Workers Fund” is likely to cost California’s employers more than $1.2 billion aggregate on an annual basis, spread across all employers—regardless of whether they employ such “excluded” workers.
Staff Contact: Robert Moutrie