Utah continues to collect less unemployment taxes from employers

Stock image, St. George News

ST. GEORGE — Because of the strength in the public sector economy, Utah employers are paying less in unemployment insurance taxes this year — again.

For the sixth consecutive year, the Utah Department of Workforce Services announced they will collect less unemployment insurance taxes from Utah employers in the 2019 calendar year.

Utah is projected to collect $156 million in unemployment insurance taxes, which is approximately $198 million less, a 56% reduction from the $354 million in tax collected in 2013 when the collection was at a peak.

The majority of Utah’s employers will continue to receive the minimal unemployment insurance tax rate for the 2020 calendar year. In 2020, approximately 75% of Utah’s established employers will qualify for the minimum contribution rate of approximately $36.60 per employee per year.

The decline in the collection of unemployment insurance taxes is good news, said Kevin Burt, director of Utah’s Unemployment Insurance Division.

Utah’s strong economy and low unemployment rate factors into the Department of Workforce Services’ decision to reduce the unemployment insurance tax rate on employers for the sixth consecutive year. Photo courtesy Department of Workforce Services.

“Our main responsibility as a division is to make sure we have an unemployment compensation trust fund that is solvent, and to be able to meet the demand for the benefits, but not to over-collect on the taxes, because we want to leave as much money in the economy as possible,” Burt said. “What this does is that it allows the employer to reinvest in their business or in their employees.”

Burt added that it is always a balancing act to meet the demand of the claims anticipated while at the same time not over-collecting from Utah business owners.

“The program is beneficial to people who are unemployed because it immediately replaces some of their wages, and it keeps some of that income flowing into the economy,” Burt said. “But, what you don’t want to do is overtax the employer. We think we’ve found a pretty strong balance and all of our statistics show that we have.”

Currently, the demand for unemployment claims is low and the state’s economy is strong; two primary factors in the continuing decline in unemployment insurance taxes collected.

Calendar year          Unemployment insurance taxes collected

  • 2013                      $354,137,691
  • 2014                      $317,910,552
  • 2015                      $259,529,757
  • 2016                      $208,359,172
  • 2017                      $185,250,500
  • 2018                      $163,746,732

Between 2009, during the peak of the recession, and 2018, the state of Utah, along with Washington and Iron counties, initial unemployment claims dropped significantly. State claims dropped by 72%, while Washington and Iron counties dropping by 69%.

The unemployment rate has also tracked a similar decline.

Between 2010 and 2019 the state of Utah’s unemployment rate declined by 5.4%, Washington County by 7.9% and Iron County by 6.9%.

The collected tax is deposited into the trust fund to pay benefits to workers who become unemployed through no fault of their own, such as a layoff, seasonal labor or business closure. Even with the continued reduction in taxes collected, Utah’s unemployment compensation trust fund is the seventh healthiest trust fund in the nation, according to the U.S. Department of Labor.

Burt credits several reasons for the trust fund’s solvency.

“The legislature has done a good job working with us and working with employers to design an effective program,” he said. “Also, we have an incredibly low unemployment rate and a great economy, and because of that the amount of claims has dropped.”

Other factors to the trust’s strength include the duration of which someone remains unemployed, which in Utah, is low.

“Finally I would say the program is administered really well,” Burt said. “We make sure only the people who are eligible for the benefits receive the benefits to try and reduce improper payment rates.”

The key to the state’s low unemployment rate is in part because the Department of Workforce Services focuses on getting people who are receiving benefits employed as soon as possible.

“We like this model,” Burt said. “We want people to know benefits are supposed to be assistance, but that it’s temporary. The main focus is getting people reemployed and reconnected to the workforce.”

Copyright St. George News, SaintGeorgeUtah.com LLC, 2019, all rights reserved.

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