CARSON CITY – Because Nevada owes $681 million to the federal government, employers likely will pay a 12.5 percent higher state unemployment tax on each of their employees in 2013.
The state Employment Security Council recommended Tuesday that companies, still reeling from the state’s worst-ever recession, should pay an average unemployment tax rate of
2.25 percent on the first $26,900 of each of their employees’ wages. That is 12.5 percent higher than the current tax of 2 percent. The increase amounts to $72 a year per employee.
Although Employment Security Division Administrator Renee Olson by law sets the actual rate in December, traditionally the administrator never varies from the council’s recommendation.
What individual employers pay depends on their frequency of laying off workers, but ranges from 0.25 percent to
5.4 percent of employees’ wages.
The tax increase will affect the approximately 36,000 companies in Nevada, and any new companies that start business here.
Besides the state tax increase next year, the federal government also will collect another $21 per employee from Nevada employers, bringing the total increase to $93 per employee. Counting federal and state taxes, employers on the average will pay $705 per employee in unemployment taxes next year.
Council members did not have much choice but to raise the tax rate. The state Employment Security Division owes the $681 million to the U.S. Department of Labor because it borrowed money beginning in 2009 to cover the cost of paying benefits to laid-off workers.
The first 26 weeks of unemployment are paid through taxes on Nevada employers. The extensions are paid entirely by the federal government. At this point, those filing claims can get benefits for as long as two years.
Although it was once one of the nation’s most solvent states, Nevada spent its entire $800 million trust fund as unemployment grew to as high as
14 percent. More than 30 states borrowed money to pay benefits.
Before the vote, Nevada Association of Employers Executive Director Jim Nelson said he did not see how increasing the tax rate would have “any positive effect on increasing jobs.”
But Brian McAnallen, government affairs director for the Las Vegas Chamber of Commerce, said the tax rate should be increased “to move forward” and get the state out of debt.
Ray Bacon, executive director of the Nevada Association of Manufacturers, summed up the situation for the council.
“There are no positive options,” he said. “Nevada fell off a cliff.”
Even with the tax increases, the state won’t pay off the federal loan until 2016. Then it must try to build up its trust fund to have money available for the next time Nevada enters a recession.
Division officials had once expected the debt to rise to $1 billion. But borrowing dropped because fewer laid-off workers qualified for benefits, which average $300 a week.
Now 12.1 percent of Nevadans are unemployed, the highest rate in the nation. But the real unemployment rate, counting people who stopped looking for work or are underemployed, is 22 percent, state economist Bill Anderson told the council.
Anderson said Nevada has 160,000 fewer jobs now than when the recession began in December 2007.
“This year we are seeing some better numbers,” added Anderson, noting that 25,000 additional jobs have been created in the past two years. “Expectations are for modest improvement, nothing like we were prior to the recession.”
He predicted a 10.6 percent average unemployment rate in 2013 and 10 percent in 2014.