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Unemployment tax hike proposed for Nevada business

Nevada businesses are facing a series of hurdles capable of stunting their growth — increased wholesale costs, supply chain nightmares, shipment delays coupled with higher shipment costs, a labor shortage — and they may soon face a higher unemployment insurance tax.

The UI tax rate helps fund the state’s unemployment insurance trust fund, which is used for paying jobless benefits to Nevadans.

While the increase is meant to replenish a trust fund depleted by the thousands of unemployment claims filed over the past 18 months, many businesses are arguing for the increase to be delayed. It’s expected to be raised by one-third of a percent from 1.65 percent to 2 percent, potentially costing employers an additional $130 per employee.

“Our economy is by no means back on track,” said Cara Clarke, spokeswoman for the Vegas Chamber. “Employers of all sizes are facing a lot of economic uncertainty. You have a lot of additional costs in addition to normal things in a business that go up, like health care. So, the timing of this, we think, is a problem and there doesn’t seem to be a real urgent need for it.”

And the Vegas Chamber has asked its members and businesses to voice their concerns at a small-business workshop, hosted by Nevada’s Employment Security Division and the Department of Employment, Training and Rehabilitation.

The virtual meeting at 9 a.m. Friday will solicit public comment over the proposed UI tax increase.

The meeting will take place on Zoom at https://us06web.zoom.us/j/87281264302?pwd=cHpuQWdKZTcrYzRpcyszbE5YcmQzQT09. Virtual public comment will be made available at 669-900-6833, meeting ID 87281264302.

Funding the fund

The state’s Employment Security Council proposed the tax increase during an Oct. 4 meeting.

Initially, the council discussed three separate rates from keeping the current 1.65 percent UI rate to increasing the figure to either 1.85 percent or 2.05 percent before settling on 2 percent.

Estimates from DETR economists Dave Schmidt and Jason Gotari found a 2 percent tax rate would add an estimated $675 million to the state’s trust fund in 2022. If the council were to maintain the current UI tax rate, it would generate about $561 million for the trust fund.

Ray Bacon, executive director of Nevada Manufacturers Association, attended the Oct. 4 virtual meeting and told the Review-Journal he supports the 2 percent UI tax proposal.

“If we get into trouble with inflation or another downturn or another whatever type of situation, we’re never going to get that bond rate that we got when we saved ourselves out of the (Great Recession),” he said. “Because bond rates, interest rates are already going up rapidly too, so it’s better to hedge forward than wind up trying to buy our way out again.”

He also noted that after the Great Recession, employers were paying a nearly 2.7 percent UI tax rate.

The council’s latest recommendation was then submitted to Employment Security Division Administrator Lynda Parven, who stepped into the post in November 2020.

Parven will make her formal rate recommendation by Dec. 8 “in preparation for the Public Hearing for Intent to Adopt a Regulation to be held that date,” according to an emailed statement from DETR.

The department added that many factors are considered before deciding on next year’s UI tax rate, which would take effect Jan. 1.

“While the Employment Security Council recommended a 2 percent rate, the administrator has the authority to choose a different rate,” DETR said.

Contact Subrina Hudson at shudson@reviewjournal.com. Follow @SubrinaH on Twitter.

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