2010 Unemployment Insurance Taxes Increase by 34%

By Oregon NFIB,

According to estimates from the US Department of Labor for 2010 as compared to 2009 actual contribution rates, the average increase in state UI rates is estimated at 34% as a percent of total wages. The average percent jumped from 0.62% of total wages to 0.83 of total wages, beginning to show the significant increases in rates due to high claims loads and long claims durations in 2008 and 2009. Tax rate increases for individual employers may be significantly higher.

This increase is the beginning of a trend that will push state UI contribution rates even higher in 2011 and 2012.

The total unemployment related employer tax burden will increase further in 25 states in 2011 with the beginning of net increases in the Federal Unemployment Tax on employers in states borrowing to pay unemployment compensation and in many states to pay supplemental state taxes to pay interest in these loans.

States with the largest increases from 2009 to 2010 included Florida, Hawaii, Idaho, Kansas, Maryland, Nebraska and Texas. The increases in Florida, Maryland and Texas were due in part to the use of a benefit ratio system in determining contribution rates. The benefit ratio system is typically more sensitive than the reserve ratio system used in most states. The increase in Hawaii was due in part to the effect of having significantly lowered the state UI tax wage base immediately before the recession and adjusting post recession. In Texas, although the increase is significant from 2009 to 2010, further increases will be minimized through the use of bonds to spread the cost of restoring solvency over a number of years.

The majority of states showed increases as estimated for 2010 over 2009. The actual data by state can be found at http://workforcesecurity.doleta.gov/unemploy/avg_employ.asp