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September 20, 2014

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Nevada businesses could face lower unemployment tax burden

The unemployment tax assessed 36,310 businesses in Nevada could be lowered in 2014 if the state pays off its federal loan earlier.

The state Employment Security Council on Wednesday recommended the average tax rate be reduced from 2.25 percent to 2.1 percent if bonds are issued.

Council member Paul Barton said, “We need to keep the tax rate as low as possible to give employers the best chance of creating jobs. Employers are struggling and they need help.”

Renee Olson, administrator of the state Employment Security Division, will appear before the state Board of Finance on Thursday to request permission to issue bonds of $580 million to $600 million to repay the federal government for money it loaned during the recession to pay jobless rates and build up the reserve.

The state is now paying an interest rate on the federal loan at 2.5 percent. The bonds might be sold at an interest rate 0.5 to 1 percent. In addition to retiring the debt, it would also eliminate a yearly $63 federal tax imposed on employers.

Olson was given the authority by the council to adjust the rate based on the interest rate of the bonds.

The council also offered an alternative of keeping the current rate at 2.25 percent if the bonds were not sold.

Olson said she would hold a workshop on the unemployment tax rate on Oct. 29 and then she has 30 days to make a financial decision.

Based on worker turnover, employers now pay a rate ranging from a high of 5.4 percent to 0.25 percent on a wage of $26,900. The higher the turnover, the higher the percentage payment. The average rate now is 2.25 percent plus .05 percent to run an employment training program.

New employers, which now total 21,402, pay at a rate of 2.95 percent for the first three years they are in operation.

The wage level will rise to $27,400 next year.

The rates will help Nevada build its trust fund to pay for benefits for jobless workers. Olson said it will be in a better position to deal with any downturn in the economy. “We want to be put in a position where we don’t have to borrow again.”

The state at one point owed the federal government $846 million during the high point of the recession but that has been whittled down.

Chief Economist Bill Anderson told the council the economy was “growing at a modest pace.” But he cautioned it was rebounding from a “historical low. He estimated there would be an added 30,000 jobs next year.

Supervising Economist David Schmidt said jobless workers are getting off the unemployment benefits earlier. The average during the downturn was drawing checks for 19 weeks of the maximum 26 weeks. It is down to 15 weeks, he said.

“There is more success at finding jobs,” he said.

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