From Rep. Sharon Steckman –
State officials announced this week that employers will see approximately $96 million dollars in tax savings next year when unemployment tax rates are reduced from 2.8% to 2.4%.
In 2012, approximately 52% of Iowa businesses will experience a zero rate. Iowa is one of only six states in the country that provides a zero rate within the tax tables. Employers who have no unemployment claims will still pay no taxes on unemployment insurance and will not have any change. Additionally, the new employer non-construction rate will decrease from 1.9% in 2011 to 1.5% starting in January.
Iowa Workforce Development is responsible for collecting unemployment insurance taxes from employers and operating Iowa’s unemployment insurance payment programs for workers. The department identifies annually the appropriate table for the following year. Unemployment tax rates are based on wages and recent unemployment benefit payments.
This decrease in unemployment taxes comes at a time when other states are increasing unemployment taxes and also reducing benefits to cover the cost of money borrowed from the federal government. Iowa is one of 13 states that have not borrowed money from the federal government to keep their unemployment trust funds solvent. By September 30, states will have to have developed a plan to pay back at least the interest on those, which in some cases is over a billion dollars that have been borrowed.
Since Iowa has no penalty on any payments owed the federal government, Iowa employers also reap the benefit of having a higher tax credit on their Federal Unemployment Tax Act or FUTA taxes. The net result of Iowa’s solvent unemployment system is Iowa employers also pay less in FUTA taxes compared to many other states. This will make Iowa businesses more competitive, and can possibly help in recruiting other businesses to come to Iowa.
