JEFFERSON CITY • Improving economic conditions in the state mean employers will save $186 million in unemployment insurance taxes according to an updated projection by Missouri’s labor department.
“Missouri employers will see their tax burden reduced,” Gov. Jay Nixon said. “This is another sign of our growing economy and lower unemployment.”
The updated projections by the Missouri Department of Labor show the debt taken on by the state’s unemployment fund will be paid back before the end of 2014, six months earlier than previously expected. Nixon said this was a result of the state’s lower unemployment rate, which dropped in December to 5.9 percent.
Associated Industries of Missouri president Ray McCarty said it was good news for Missouri’s employers. He said the improved outlook on the economy was responsible for the change.
“I will tell you, there’s nothing that any governor of any party can do to make this happen or not happen,” McCarty said. “We’re employing lots of people and we’re paying them well and we’re paying a lot in unemployment taxes.”
Normally, employers pay only about 0.6 percent on the first $7,000 of each employee’s wages in unemployment insurance taxes. But Missouri’s unemployment insurance fund had borrowed $1 billion from the federal government since 2009 to pay out unemployment benefits.
As the number of people receiving unemployment increased during the recession, the number of people employed also dropped – reducing the money going into the fund even as more was needed.
When a state’s fund is in debt, the tax break Missouri employers get on the federal unemployment tax is reduced by 0.3 percent each year, raising the amount employers must pay.
Currently, employers are projected to pay about $126 per employee for unemployment insurance in 2014 but that will drop to $42 per employee when the loan is paid off in November of 2014. In 2013, employers paid about $105 per employee.
This reduction will save employers about $186 million, Nixon said.
McCarty said he hoped the projections were accurate, noting that this was a big change from the previous projection. The projection was based on data through December of last year and showed the unemployment insurance fund would have an approximately $4 million surplus at the end of 2014. The previous report projected the fund would still be in debt by $31.5 million at that time and was based on data through August of 2013.
“We hope these projections come true,” McCarty said. “The federal unemployment tax is usually offset almost totally by the fact that we have a good, healthy unemployment system.”
McCarty said the reduction in the length of unemployment benefits from 26 to 20 weeks may also have contributed. Missouri reduced the state-funded unemployment benefit period in 2011.
Nixon said the reduced length of benefits was a very small piece of the improved outlook, crediting the drop in unemployment instead.