Washington employers will save $87 million in unemployment costs in 2008 - Dec. 14, 2007
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Audio: http://fortress.wa.gov/esd/portal/info/newsroom/audiofiles/audio/
OLYMPIA – Low unemployment and a new rate structure for new businesses will save Washington employers more than $87 million in unemployment taxes in 2008.
The savings stem from a new law introduced by Governor Chris Gregoire in 2007 that reduces unemployment tax rates for new businesses next year and from lower tax rates for many employers, particularly those that had few or no layoffs in recent years.
“This is another sign of our commitment to strengthen our state’s economy,” said Governor Chris Gregoire. “Washington is already recognized as one of the top states for business, and reducing the cost of doing business improves our competitive advantage even more.”
Approximately one-third of the 9,482 businesses that were in the highest tax rate in 2007 will move to a lower tax rate in 2008, and the number of businesses in the lowest tax rate will increase by about 8 percent, to 76,473. As a result, about half of all Washington employers that are covered by unemployment insurance will be in the lowest tax bracket, paying a maximum of $2.29 a week per worker.
“Over all, employers should be happier about their tax rates going into the new year,” said Employment Security Department Commissioner Karen Lee.
The average unemployment tax rate will drop from 2.05 percent in 2007 to 1.7 percent in 2008. The highest rate will be 6.2 percent for employers that owe past-due taxes, and the lowest will be 0.35 percent.
Lee cautioned that a lower tax rate will not necessarily result in a lower tax bill for an employer. For example, an expanding business may have more workers and more wages on which to pay taxes.
She said that about 15 percent of insured employers will see rate increases in 2008, while 36 percent will see rate decreases and the rest will stay the same.
“It’s like car insurance. If you have a good driving record, you may qualify for a lower premium rate, but your total insurance bill will increase if you buy an additional car,” Lee said.
Additionally, the amount of wages on which employers pay unemployment taxes will increase in 2008. Taxable wages are determined by the average annual wage for all workers in the state. The taxable wage base will grow from $31,400 in 2007 to $34,000 in 2008. The increase will affect employers that pay their workers more than $31,400 per year.
For example, a business that pays one of its employees $35,000 per year would have paid $643.70 in taxes for that employee in 2007 based on the average tax rate (2.05 percent on $31,400 of the employees wages), but will pay $578 in 2008 based on the average rate for that year (1.7 percent on $34,000 of the employees wages), for a savings of $65.70 on that employee. So, on average, unemployment taxes per employee will decline by about 10 percent in 2008.
Employers that have laid off more employees in the past couple of years or had former workers who collected benefits for a longer time are taxed at higher rates.
