To all those Nevadans who are eager to raise taxes on struggling employers, we have an important reminder: Business taxes already are headed up, and the Legislature has nothing to do with it.
On Tuesday, the state Employment Security Council recommended a 12.5 percent increase in unemployment taxes for 2013. If approved by Employment Security Division Administrator Renee Olson in December – and there’s no reason to believe she’ll stray from the council’s recommendation – the average rate will rise from 2 percent to 2.25 percent on the first $26,900 of each worker’s wages. The actual rate ranges between 0.25 percent and 5.4 percent, depending on how many workers have been laid off by a company.
That tax increase would amount, on average, to about $72 per worker, per year. In addition, the federal government is boosting its unemployment tax on Nevada businesses by $21 per employee, per year. For 2013, employers will pay an average of $705 per employee in unemployment taxes.
The reason for the tax increases? Nevada has borrowed $681 million from Washington to pay unemployment benefits over the past four years. (The state covers the first 26 weeks of benefits, while the federal government pays full freight for extensions.) The new taxes should allow the state to pay off that debt by 2016. At that point – assuming the state can avoid another significant downturn – the taxes would rebuild Nevada’s empty unemployment trust fund, which held $800 million when the economy crashed.
The state doesn’t have the option of waiting and hoping for Congress to forgive the loan – more than 30 other states borrowed money to pay jobless benefits, and the federal government has its own deficit and debt problems to worry about.
While it is absolutely necessary for Nevada to repay Washington, we’ve long had a problem with giving an unelected official the authority to raise taxes. Elected officials should be making this call, no matter how happy it makes them to see someone else do the job.
That said, the larger issue here is election-year debate on Nevada tax policy, and whether businesses should be tapped once again to improve funding for public schools. This unemployment tax increase, by itself, could suck up to $90 million out of Nevada’s economy next year. A tax hike that large will have consequences for hiring and household income. Were you hoping for a raise next year? Rising unemployment taxes are one more thing that will hurt your chances for a bigger paycheck.
Nevada still has a 12.1 percent jobless rate, the highest in the nation. But its real unemployment rate, including the underemployed and those who’ve given up their job searches, is at least 22 percent. Lawmakers must remember all this when they sort out their own budget math in 2013.