Nevada bucks trend in unemployment tax rate

By Cy Ryan

Tuesday, Oct. 18, 2011 | 9:38 p.m.

CARSON CITY – Nevada has bucked the trend among states when it comes to assessing business to pay the tax that finances the checks for those out of work.

The Tax Foundation, in a study released Monday, says states routinely cut unemployment taxes to business during good economic times and raised them in bad times.

The state Employment Security Council voted this year to freeze the average tax rate for the 56,000 businesses at 2 percent assessed against an average salary of $26,400 for next year.

Council Chairman Paul Havas said raising unemployment taxes in bad times “is not a religion.” He said the state has done it in the past. But this time the state experienced the highest foreclosure rate in the nation and the highest unemployment rate.

“We work to preserve the lowest tax rate in the nation,” said Havas, chairman of the council for 36 years. That encourages employers to do more hiring.

The study showed Nevada had the 35th lowest tax rate among the 51 states in 2010. And the weekly payments to the unemployed were 18th highest in the nation.

Nevada has borrowed $736 million from the federal government to make the jobless payments. It is one of 34 states that got a loan from the government. And it will probably borrow more during this economic downturn.

The foundation said however Nevada was only one of 15 states that had an adequate reserve to make more than one year in payments going into the current economic downturn.

Nevada has had the highest unemployment rate among the states at more than 13 percent. But it is one of 18 states that have not imposed a solvency tax on employers. Havas said Nevada has preserved its system and “we don’t have to have a solvency tax.”

The experience rating system has done much to keep the rates low, said Havas.

Employer tax rates are based on worker turnover. Businesses with the lowest turnover pay a rate of 0.25 percent on the state’s average salary of $26,400 or $66 a year on each worker. Employers with the highest turnover pay a 5.4 percent rate or $1,425 per worker each year.

The average weekly payment last year to an unemployed worker was $325 but it is dropping to $300. Hawaii pays the highest at more than $400 a week and Mississippi pays the lowest at slightly less than $200.

The Tax Foundation study says Nevada is one of 13 states that require a one-week cooling off period before a worker qualifies for unemployment payments. And the unemployed must make 3-5 contacts a week in seeking a job, one of the highest in the nation, according to the study.

The study says a federal tax of 6.0 percent is also levied on the first $7,000 of each worker’s earnings. However employers in a state that meets the federal guidelines can be given up to 90 percent credit on the federal tax. State officials said after the last rate setting that Nevada qualified for the reduction.