State to increase unemployment tax rate on businesses

By Cy Ryan

Tuesday, Dec. 7, 2010 | 12:10 p.m.

CARSON CITY – Despite a plea from some employers, the state is going to increase its unemployment tax for businesses starting Jan. 1 to replenish its depleted trust fund due to the highest jobless rate in the nation.

Cindy Jones, director of the state Division of Employment Security, raised the annual average tax assessed per employee from $353 to $532.

And Nevada employers could be paying a higher federal tax to help the state pay off the expected $820 million it will probably borrow from the feds by the end of next September.

In adjusting the tax formula, employers with the lowest turnover rate will be paying less. The lowest current rate is set at $67.50 per worker, which drops to $66.50. Those with the highest turnover will be paying $1,436 per worker, down from the current $1,458, but more businesses will be shifted into higher payment levels.

Employers pay the tax on the first $26,600 of each worker's wage.

Adjusting the formula means the rate of employers who were paying the low rate will drop from 56 percent to 33 percent. And 7.1 percent of employers will be assessed at the highest rate, compared to 5.4 percent this year.

Veronica Meter of the 6,500-member Las Vegas Chamber of Commerce, told Jones that small businesses are laying off workers and the increase would hit them the most.

“Even a couple hundred dollars could make the difference in closing the door,” Meter said in advocating for delaying any increase.

A group called the Nevada Business Coalition e-mailed a petition with more than 250 names calling for no increase in the tax.

The average rate is rising from 1.3 percent to 2 percent. Jones said if it is kept at 2 percent, the state’s fund would break even in 2014 and pay off the federal loan in 2018.

The rate hasn't been at 2 percent since the 1980s because of the booming economy in Nevada. But the unemployment rate has escalated to more than 14 percent, draining any reserve in the trust fund.

The unemployment trust fund can't be used to pay off the interest on the federal loan. The federal interest is expected to be $70 million with the first payment of $30 million due next September.

Jones said the agency has requested a legislative bill to assess Nevada employers to pay off the government interest. But the incoming administration of Gov.-elect Brian Sandoval has not signed off on it. In his preliminary planning, Sandoval has set aside $66.3 million from the state’s general fund to pay off the federal interest.

Jones said there have also been discussions about issuing bonds to pay off the federal interest but no decision has been made.