As signs point to an economic rebound in 2010, some Washington employers will face recession fallout next year in the form of higher unemployment-insurance tax rates.
The Employment Security Department has begun mailing 2010 tax-rate notices to more than 170,000 businesses. The average tax rate in 2010 will be an estimated 2.38 percent, up from 1.55 percent in 2009 – but still lower than rates during the last economic recovery in 2004 (2.81 percent) and 2005 (2.78 percent), and equal to the 2006 average rate.
The 2010 tax rates will range from 0.95 percent to 6 percent, compared to 0.35 percent and 6 percent in 2009. Taxes will apply to the first $36,800 of earnings for each worker.
The tax rates are recalculated each year using a formula established in state law. The Employment Security Department does not have discretion to set or adjust tax rates.
Because the state had historically low unemployment from 2005 through 2008, the 2009 tax rates were the lowest in 40 years. But high unemployment coupled with record benefit payouts in 2009 will drive up employers’ tax rates in 2010. Even employers that have had no layoffs in the past four years will see higher tax rates because the benefit payouts far exceeded taxes collected.
During the July 2008 through June 2009 fiscal year, the state paid about $2 billion in unemployment benefits and collected about $1 billion in taxes. Increasing revenue collections for the shared costs of the unemployment system now will slow the decline of the unemployment-benefits fund and help avoid sharper tax increases in the future.
Unemployment taxes are deposited into a trust fund from which benefits are paid.As of Nov. 30, there was $2.79 billion in the fund, enough to provide about 14 months of benefits in a severe recession.
The recession has demonstrated that Washington’s unemployment insurance system is one of the most stable in the country, said Employment Security Commissioner Karen Lee.
“So far, more than two dozen states have drained their unemployment funds and have racked up billions of dollars in federal debt to pay benefits, and more are going bankrupt every month,” said Lee. “After the recession, those states will have to doubly tax their employers to pay off their loans and also replenish their unemployment funds, while also paying ongoing claims – and that will be a competitive advantage for businesses in our state.”
Employers paying taxes in January 2010 are filing for the last three months of 2009, so they should continue to use their 2009 tax rates. The new tax rates will be used to calculate taxes that are due April 30 for the first quarter of 2010.
