Iowa Workforce Development announced Tuesday it is changing the tax tables for employers which will save millions dollars.
IWD spokesperson, Kerry Koonce says the tax table that determines how much employers pay into the unemployment trust fund is reviewed every year.
“You can either move up into a higher tax table, which reduces employer taxes, or you can move down into a lower numbered tax table, which would increase employer taxes,” Koonce explains.
“There are eight tables in total and we are moving from table four to table five, which in 2013 will save Iowa employers just under a hundred million dollars in unemployment taxes paid into the system.”
The average employer will see the rate they pay fall from 2.4% to 2.0% for 2013. Koonce says there are several reasons for the move to lower the taxes required of businesses.
“It’s happening because we do a good job managing the trust fund. And it’s happening because Iowa has done a good job compared to other states in coming out of the recession. Our wages being paid are going up, our manufacturing hours are back over to working an average over 40-hours-a-week, our employers have been diligent in paying their taxes,” Koonce says.
Iowa also doesn’t have to pay any unemployment money back to the federal government. “We did not borrow from the federal government to support our trust fund, which most states had to do that, and therefore that causes their tax rates to go up. We didn’t have to do that, so our rates have stayed consistent,” Koonce says.
You may wonder how the rates paid in by employers can go down when Iowa’s unemployment rate inched up slightly in the last month. Koonce says the table is not based on a one-month trend.
“It’s not based either on just the unemployment rate…it looks at a several year period the amount of dollars that have been paid out of the trust fund. And it looks at the amount of dollars that have been coming into the trust fund, and it’s a very complicated actuarial formula that says there is more than enough funding to pay out even the highest level of benefits that you have experienced in the last five years,” Koonce explains.
Over 52% of Iowa businesses do not have to pay in any unemployment taxes under the table.