February 23, 2021
Rep. Jim Cox, chair, House Labor and Industry Committee;
Rep. Gerald Mullery, Democratic Chair, House Labor and Industry Committee
Dear Chairman Cox, Mullery, and Committee Members:
Thank you for giving Pennsylvania Farm Bureau, the state’s largest general farm organization, an opportunity to talk about a change in the state’s unemployment compensation law that will provide a tangible benefit to our state’s farm families and align state and federal tax policy.
Farmers in Pennsylvania are generally required to pay unemployment taxes for workers that perform seasonal farm tasks on farms. Farms that grow fruits and vegetables hire most of their employees on a seasonal basis, typically around a harvest window. For decades, most of those employees are made up of foreign workers who come to this country as part of the federal H-2A immigration system.
The vast majority of workers arriving under the H-2A system are employed by one farm during their time in the United States. Before arriving in the country, they sign an employment contract ensuring a set number of hours and wages. Once their contract is complete, these workers return to their home country. By the nature of their employment contract, these workers are not allowed to collect unemployment. The federal government has long exempted farmers from having to pay unemployment taxes on these workers, however our state continues to require that farmers pay unemployment compensation taxes for these workers. Roughly half of the states give farmers the same types of exemptions as provided by federal law.
We are supportive of House Bill 390, introduced by Rep. Torren Ecker, that would provide a clear exemption that farmers do not need to pay unemployment taxes on workers who have come to this country under the H-2A system.
Enacting this change in state law would not take a single benefit away from any foreign worker. Enacting this law would have no negligible impact on who farmers hire and they would still hire the same number of workers to perform these crucial farm tasks.
The public policy question asked by this legislation is simple: should farmers be required to pay unemployment taxes for workers that can never collect unemployment? Is it better public policy to allow that employer to retain those taxes to reinvest in their business?
While this legislation is tangentially related to larger issues surrounding immigration and the use of migrant labor, it is disingenuous to tie this bill to those larger questions surrounding immigration. At the end of the day, adopting House Bill 390 will not alter the landscape of how farmers hire workers to meet the time-sensitive labor needs of their farms.
It is worth noting that roughly 4,300 H-2A workers were employed on Pennsylvania farms in 2020. As best as we can estimate, farm employers contribute roughly $550,000 to the state’s unemployment compensation fund annually for these H-2A workers. Cumulatively, that is not a large contribution to the state’s overall unemployment compensation fund; however, for the individual farm owner, this could result in a significant reduction in tax liability. And it bears repeating that reduction in tax liability will not negatively impact farm workers.
Taking a broader perspective, Pennsylvania Farm Bureau has long supported legislative initiatives that creates uniformity between state and national tax policy. Our legislative agenda this session includes supporting several changes to the state’s tax code to align our state tax laws with federal. Running a small business is complicated enough. We owe it to our small business owners to make smart tax policy changes to create uniformity between federal and state tax policy. For farm businesses that use temporary foreign workers, one could imagine the payroll headaches that two sets of standards create.
House Bill 390 represents good public policy for our farm families. It will remove a tax burden that has no negative impact on workers, but instead gives farmers the ability to reinvest those dollars back into their small businesses. It does not change any aspect of immigration, nor change the landscape at all how farmers will seek workers for these critical tasks. We encourage your strong support for HB 390 and ask for your positive vote on it in committee and the House floor. Thank you for your consideration and for giving us the opportunity to offer some thoughts in support of this needed legislative change.
Director, State Government Affairs