SALT LAKE CITY — No matter what happens in Congress, most Utah businesses will get at least a partial tax cut thanks to the state's strong economy and low jobless rate.
The Utah Unemployment Insurance Division announced Wednesday that the majority of employers across the Beehive State will see a 48 percent drop in the unemployment insurance tax they will pay next year.
"We've had such a really great run at the economy lately that we've not only built (the Unemployment Insurance Trust Fund) up but now we're dropping the taxes," division Director Kevin Burt said.
Next year, more than 75 percent of the state's employers will qualify for the minimum contribution rate of approximately $34 per employee per year — a 48 percent decrease from 2017, Burt explained.
The Utah Department of Workforce Services is responsible for collecting state unemployment insurance taxes from employers, with the money deposited into the Unemployment Insurance Trust Fund, he said. Eligible workers receive benefit payments from the trust fund.
"We assess (the rate) each year to determine whether or not the rate needs to continue to decline," Jon Pierpont, Department of Workforce Services executive director said. "We want to be a business-friendly organization, and anytime we can put money back into the pockets of businesses and working folks out there, that's a good thing."
Businesses will be getting their rate notifications beginning Wednesday.
Local trade organizations lauded the decision to lower unemployment insurance taxes.
Todd Bingham, president of the Utah Manufacturing Association, said that after weathering the storm of the Great Recession, the fund is in good condition, which touts how well the state has managed it.
"Overall, it speaks highly to the business environment in Utah and how we as a community work with our governmental agencies to be proactive rather than waiting to be reactive," he said. "The (unemployment insurance) trust fund is one of those areas that we've been managing carefully to protect employees and employers who are contributing to it."
Burt noted that over the last five years, total insured wages in Utah have jumped from $46.7 billion in the fiscal year 2012 to $62.7 billion in the fiscal year 2017. The wage growth is largely attributable to the state's strong economy and robust job growth across a variety of employment sectors, he said. That significant increase in wages has resulted in a very stable unemployment insurance trust fund.
"We try to have the trust fund at a solvency level that when a recession hits, we don't increase the taxes right away," Burt said. "We've kept it so solvent that now we're actually dropping the amount we collect so that we can leave that money in the economy and we're not putting the trust fund at risk."
At the end of the last state fiscal year, the fund had a balance of $1.03 billion — within the statutorily desired level developed by the state Legislature, he added.
Utah’s average taxable wage base increased from $33,100 to $34,300 over the past year, Pierpont said, and 2017 will mark the fourth straight year the Utah Department of Workforce Services has collected less in taxes from local employers. This year, Utah is projected to collect $185 million in unemployment insurance taxes — approximately $170 million less than the amounted collected in 2013.
The lowest balance of the Unemployment Insurance Trust Fund occurred in 2011 when it fell to $253.5 million as the state grappled with the effects of the Great Recession, he said. For context, the amount of unemployment insurance benefits paid at its peak was in 2009 when $537.9 million in benefits were authorized, he added. By comparison, the state paid out $184.6 million in in 2016.
According to the U.S. Department of Labor, Utah’s Unemployment Insurance Trust Fund is the fourth healthiest in the nation. Wyoming rated No. 1, followed by Oregon at No. 2, Mississippi at No. 3, and Nebraska rounding out the top five.Comment on this story
Individual states administer their own unemployment insurance programs, though every state is required to adhere to the same standards set by federal law.
“Proper calculation of the tax rate is critical to help ensure Utah’s Unemployment Insurance Trust Fund remains solvent during times of high unemployment and to ease the tax burden on employers to encourage economic growth,” Burt said. "What we want to do is keep as much money in the employers' pockets as possible so they can expand their business or pay their employees more."