Ricketts, Department of Labor announce new tax relief
Governor Pete Ricketts and the Nebraska Department of Labor (DOL) announced $11.4 million in new tax relief, thanks to a reduction in the unemployment insurance (UI) tax rate. The State of Nebraska has now delivered $138.4 million in cumulative unemployment insurance tax relief from 2016 to 2020, relative to the taxes that would have been collected in those years had 2015 tax burdens remained constant.
“Our team’s excellent work to serve Nebraskans has allowed the State to deliver tax relief while maintaining one of the strongest unemployment insurance tax systems in the country,” said Gov. Ricketts. “In addition, Nebraska’s innovative reemployment program is helping Nebraskans get back to work more quickly as well as to find higher-paying jobs.”
Nebraska’s average unemployment insurance tax rate for employers in 2020 will be lower than in 2019. The average tax rate for 2020 is 0.55 percent, a decrease of 0.15 percentage points from 2019 and a decrease of 0.62 percentage points from the average rate of 1.17 percent in 2015.
Nebraska employers will pay an estimated $11.4 million less in taxes in 2020 than they paid in 2019. Of this projected tax relief, $6.2 million resulted from the Commissioner of Labor exercising his discretionary authority. When the amount available for the payment of benefits in the federal and state Unemployment Trust Funds exceeds a statutorily established level, the Commissioner may reduce the tax collection goal.
A continued decline in unemployment claims and benefits paid accounts for the balance of the decrease in the unemployment insurance tax rate. The amount paid declined from $76 million in fiscal year 2018 to just over $67.5 million in fiscal year 2019, including nearly $62.4 million paid by taxable employers. The amount of benefits paid was almost $25.4 million less in 2019 than in 2015. While total benefits and claims decreased from 2018 to 2019, the maximum weekly benefit amount increased from $414 in 2018 to $426 in 2019.
“Employers who have paid more in taxes than their teammates have received in benefits will see tax relief,” said Commissioner of Labor John H. Albin. “The Tax Foundation’s State Business Tax Climate Index ranked Nebraska’s unemployment insurance taxes 11th in the nation, when considering the recent year’s effective rate schedules, and the statutory rate schedules that may be go into effect subject to economic conditions and the state of the UI Fund. Nebraska is also among the states recognized for having the lowest minimum and maximum tax rates.”
Governor Ricketts credits Nebraska’s first-in-the-nation reemployment program, launched in October 2015, for supporting the latest decrease. The 2019 fiscal year decline in benefits paid is the largest year-over-year decrease since the 2016 drop when the program was implemented.
“The positive effects of the reemployment program have continued to pay dividends for Nebraska,” said Commissioner Albin. “As of December 2019, the number of Nebraska workers exhausting their benefits is significantly less than the national average, 20.84 percent versus 34.75 percent nationally.”
Nebraska’s reemployment program is unique among state labor departments in that all jobseekers who receive unemployment benefits are required to enroll in an individualized reemployment plan to remain eligible for benefits unless they are only on temporary layoff from their regular employer.
Unemployment insurance benefits are paid from the Trust Fund to workers separated from covered employment who meet eligibility requirements. Nebraska’s average unemployment insurance tax rate is based on the revenue target for the Trust Fund, which is used to pay benefits; the state’s total taxable wages; and the amount of unemployment benefits paid in the previous fiscal year.
Tax rate notices for 2020 were recently mailed to employers and tax rates are available online at dol.nebraska.gov/uiconnect. A listing of all unemployment tax categories and the corresponding rates is online at dol.nebraska.gov.