2014 State UI Tax Info Available

From Rick McHugh of NELP:

A useful report from U.S. Department of Labor is the Significant Measures of State UI Tax Systems. The 2014 edition has been released.

One of the useful features of this report is that USDOL calculates an “Adequate Financing Rate.” The bad news in the report is that most states are under-financing their UI programs using this benchmark: meaning they will not be prepared with trust fund reserves sufficient to ride out increased benefit costs during the next recession. Forty-four states had an average UI payroll tax below their minimum adequate financing rate in 2014. Yikes!

Business climate debates dominate UI discussions in the states. (Yes, I know these are not real world discussions. Ironically, business climate is viewed as real by the same folks who do not think climate change is real.) The Significant Measures report gives advocates key information about individual states as well as comparative information presented in tables. In addition, by selecting the United States as an “individual state” you will have a ready-reference to how your individual state compares to U.S. averages.

In terms of business climate claims, many employer groups will focus on average tax rates on taxable wages. The average taxable employer paid $398 per employee in 2014. This translates to 0.8% of total wages, or 80 cents of every $100 dollars of wages. Nonetheless, using average UI taxes on taxable wages exaggerates tax levels.

The Significant Measures report gives us some basic information on the distribution of taxes that usefully shows that most employers do not pay average UI taxes. Instead a few employers (6 percent in 2014) pay taxes at the highest rate and the rest pay lower taxes, many pay close to no UI taxes. Indeed, last year 37 percent of all employers paid the lowest state tax rate available (in five states this rate was zero) and 47 percent paid a tax rate of less than 0.5 percent of total wages (or less than 50 cents for every $100 dollars of wages). In some states, I have observed that up to 70 percent of employers paid minimum tax rates in some years. This tax distribution info is not routinely shared by state agencies in my experience, making this source of information the best we have in many states.

Yes, there are states where UI taxes are higher and perhaps a half-way credible business climate case can be made there. However, overall it is difficult to make out a case that UI payroll taxes make up a significant element of business climate. In the few states with higher UI taxes, I suggest comparing UI taxes to total wages and benefit costs (according to the 2015 National Compensation survey from BLS, UI taxes were $ 0.23 of the average hourly cost of labor ($33.49) in the private sector in 2014. Or, profits. Or, health care. Or, pensions.

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