Unemployment Insurance Tax - What The Media Isn't Saying

In December 2009, the National Association of State Workforce Agencies (NASWA) published the results of a survey it conducted on Unemployment Insurance (UI) Trust Fund Solvency, in the format of a summary of the responses from the states.

Soon after, media outlets such as CNN, Inc Magazine, WorkForceATM.com, HRExecutive.com, HRBits.com, and Urban.org, ran stories based on the conclusion reached by the report. The conclusion reads:

 

The NASWA UI Trust Fund Solvency survey shows a total of 35 states will be seeing a UI Tax increase on employers from 2009-2010.

 

Many of the stories suggested that the increases would put many companies out of business.

 

The final page of the summary is a listing of the predicted rate increases. Company.com has compiled a full comparison of those forecast rate increases and the actual increases employers will see. 

Alabama, for which NASWA reported a 90 percent increase in UI Tax, saw only a 26% increase for businesses paying the state maximum UI tax rate, which amounts to $152 per employee per year. 

Nebraska was reported to be facing a 150 percent increase -- the actual increase for employers paying the maximum amount in the state in 2009-2010 was 53 percent, which was an increase of less than $300 per employee per year. 

New York was reported as facing an 11 percent increase -- that materialized as a less than 2 percent increase, or $17 per employee per year. 

Hawaii, the state which saw the larget increase, was reported as facing a 600 percent UI Tax hike -- for experienced employers paying the state maximum in both years, that raise was 198 percent, or $1600 per year -- 600 percent would have been an increase of $4836 per employee per year.

Florida, which has an empty trust fund account, and has borrowed $1.14 billion from the federal government to pay unemployement benefits, reduced its UI taxable pay base from $8500 to $7000 per employee per year, effectively reducing the UI tax it collects by $93 per employee per year for experienced employers paying the state maximum in 2009-2010.

Company.com conducted this research by calling each state and requesting state maximum UI tax contributions for experienced employers, starting UI tax rates for new employers, and the state's maximum pay base which those taxes are applied to. Employers who did not pay the state maximum in 2009, but who will be required to pay the state maximum in 2010 will see larger tax increases. 

We quickly concluded that companies who could be made or broken by this tax were, for the most part, probably already in significant danger, and that, based on panic-inducing headlines, the NASWA report may have done more harm than good to the small business community. 

In reality, a 50 employee company in Georgia will see a total tax increase of $3315, if it paid the maximum tax in 2009 and does so again in 2010. In Oregon, that same 50 employee company's UI tax bill will increase by $2480, and in Oklahoma the increase will be $2205 for a 50 employee company.

However, in some states such as Iowa, that increase will cost 50 employee companies almost $16000 in additional taxes.