For the first time ever, more than half of all Washington employers will be in the lowest unemployment-insurance tax bracket in 2009, with tax savings totaling some $45 million.
The department is currently mailing 2009 tax-rate notices to more than 150,000 businesses. All told, about 25 percent of employers will see rate decreases, with just 18 percent seeing rate increases.
For 2009, 51 percent of employers will be in the lowest tax-rate class (rate class 1), which is 0.35 percent of payroll costs. Only 3 percent of employers will pay the highest tax rate (rate class 40), totaling 6 percent. The average tax rate will drop to 1.55 percent, from 1.7 percent in 2008.
The taxable wage base, which is the amount of wages on which an employer pays taxes for each employee, is $35,700 for 2009.
Employers are taxed based on their unemployment history over the previous four years, as well as their employees taxable wages. Employers that have laid off more employees, or had former workers who collected benefits for a longer time, are taxed at higher rates. Employers that have had no layoffs in the past several years will pay the lowest rate.
Employment Security Commissioner Karen Lee said that 2009 tax rates are improving for many employers because unemployment rates have been relatively low over the past four years. “The recent economic conditions haven’t existed long enough to significantly change employers’ experience ratings at this point,” she said, adding that the 2009 tax savings come on top of an $87 million tax reduction in 2008.
Unemployment taxes are deposited into a special account from which benefits are paid. Washington’s unemployment account is approximately $4 billion, enough to provide about 20 months of benefits in a severe recession. Through the end of October 2008, $959 million were collected in payroll taxes and $874 million were paid in benefits. Lee noted that the states unemployment trust fund is one of the healthiest in the nation, at a time when many other states are running out of money to cover unemployment benefits.
“Our businesses are the life blood of Washington’s economy,” said Gov. Chris Gregoire. “A reduction in taxes means an increased chance of a local company succeeding during these tough economic times.”
