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February 11, 2012

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Employers likely to face increase in unemployment tax rate

By Cy Ryan (contact)

Wednesday, July 21, 2010 | 1:45 p.m.

CARSON CITY – While a lot of politicians are promising no new taxes for the 2011 session of the Legislature, Nevada’s 60,000 business owners will still get hit with a hike in their unemployment tax next year.

“I guarantee it will happen,’’ said Ray Bacon, executive director of the Nevada Manufacturers Association. He isn’t looking forward to it but said he believes it's necessary to stabilize Nevada’s depleted unemployment trust fund.

The Nevada Employment Security Council has scheduled a meeting for Aug. 3 to take public comments and review the impact of federal loans to pay the insurance benefits to the jobless.

The state has borrowed about $400 million since last fall from the federal government to pay the claims. Nevada has the highest jobless rate in the nation at 14.2 percent.

Mae Worthy, spokeswoman for the Employment Security Division, said, "We expect to hit $800 million by the end of the year,” talking about the amount borrowed from the federal government.

The division says in its meeting notice it “anticipates an increase may be necessary in the average unemployment insurance tax rate for experience-rated employers for calendar year 2011” due to the economic downturn.

Cara Roberts, director of public relations for the Las Vegas Chamber of Commerce, said it is examining what to recommend in light of the economy.

The average rate statewide for employers this year is 1.33 percent for the first $27,000 earned by each worker, the same as it was in 2009. The rate of an employer is based on the worker turnover in the business.

The maximum rate for an employer is 5.4 percent. New employers must pay 2.95 percent of taxable wages for several years until they obtain an experience rating on the basis of their worker turnover.

Paul Havas, chairman of the employment council, said there probably will be an increase but Nevada employers now pay some of the lowest rates in the nation. He said the loan from the federal government can be repaid over 10-15 years and “not be a burden on employers.”

Bacon said 52 percent of employers have been paying the lowest rate at 0.25 percent. He says the question is whether the federal government will require interest on its loan and how fast it will have to be paid back.

Havas said 44 states have borrowed from the federal government. Nevada has been able to keep its rate low because of its “experience” rating that is tied to turnover in the business of an employer.

Havas stressed it was “demagoguery” by political candidates who suggest that the people drawing benefits are freeloaders. Those who are jobless have to make themselves available for employment and have to apply for jobs to qualify for the benefits. But they have to seek similar employment, he said.

He said the idea the unemployed aren't seeking employment is “preposterous.”

The division said it is seeking comments from small business owners to gauge the effect that a potential tax rate increase might have on their operations. A small business is defined as 149 employees or less.

The council will make its recommendation on the rate setting and Division Administrator Cynthia Jones will make her decision in December.

Last year, Gov. Jim Gibbons suggested a 1 percent, or $70 million, decrease in the rate for businesses. But the council decided to keep the average business tax rate after hearing economists predict the jobless rate would reach 14 percent this year.

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