Unemployment Insurance Tax Changes for 2010

By Christine Swanson AGC Government Affairs Manager

During the week of December 7 the Employment Security Department started mailing tax notices for 2010. Unfortunately tax rates will rise in 2010 for many employers. The average tax rate in 2010 will be 2.38 percent up from 1.55 percent in 2009.

AGC worked hard during the 2009 legislative session to get the tax rates adjusted lower as a result of a large trust fund balance as well as lowering the cap from 6.5 percent to 6.0 percent. Even with these changes you are still going to experience a potential increase; fortunately it will not be as large as it could have been without the legislative changes made in 2009.

The increase is predominantly based on two factors – one employers are laying workers off which has a direct impact on taxes and two increased tax due to the social-cost factor. The social cost factor is used during times of deep recession when benefits paid far exceed taxes collected the social-cost tax acts as a brake to slow the decline of the unemployment benefits fund and keep it stable. The advantage for employers is that it prevents much sharper and sudden tax increases that would be required if the fund were threatened with insolvency.

Look for your tax notice in the mail soon. AGC will continue to fight any increase in unemployment benefits in the 2010 session to prevent further tax increases.