Official cuts state tax rate

CARSON CITY -- State Employment Security Division Administrator Cindy Jones did something Friday that almost never happens in Nevada state government: She reduced taxes.

Jones cut the average unemployment tax rate paid by employers by 0.05 percentage points starting in January. The tax provides unemployment benefits to employees who are laid off from their jobs.

While the reduction may seem small, it means employers will pay on average $12.70 a year less in unemployment taxes on each employee who earns wages of at least $25,400 a year.

Nevada employers next year will pay an average unemployment tax of 1.33 percent. The tax had been 1.38 percent for the past three years.

The tax rate an individual company pays varies widely, from 0.25 percent for companies that seldom or never lay off workers, to 5.4 percent for those with a history of frequent layoffs.

The combined savings for Nevada businesses will be $12 million in 2008.

"It is less taxes they will have to pay," Jones said. "The last thing we want to do is raise taxes at this time."

Jones cut the tax rate as a way to stimulate Nevada's sluggish economy. Unemployment has risen to 5.2 percent, higher than the national 4.7 percent rate and the highest rate in the state since August 2003.

The state Employment Security Council last month recommended the unemployment tax rate be cut. The council is a group of private business leaders and state agency administrators. Jones, however, has the sole power under state law to implement the reduction.

She expects the unemployment rate to climb slightly during the winter and then decline next summer. Her staff projects an average statewide unemployment rate of 5.1 percent in 2008.

State economists do not see much improvement in the economy before 2009. Nevada has led the nation in job growth in 12 of the past 18 years. But the job growth rate of 0.9 percent in 2007 was lower than the 1.2 percent national average.

From April to October, Nevada businesses added 500 jobs, compared with the average 33,000 jobs added during the same period over the past five years.

Even with the drop in the tax rate, the unemployment security trust fund is expected to increase to $865 million by the end of 2008, up $65 million from the end of 2007.

Laid off employees are paid unemployment benefits from the fund.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or (775) 687-3901.