LINCOLN – Today, Governor Pete Ricketts and the Nebraska Department of Labor (DOL) announced new tax relief thanks to a reduction in the unemployment insurance tax rate. This year, Nebraska’s average unemployment insurance tax rate for employers is lower than in 2018. The average tax rate for 2019 is 0.70 percent, a decrease of 0.06 percentage points from 2018 and a decrease of 2.63 percentage points compared to 2011.
“When the state controls spending and delivers tax relief, businesses can focus more of their resources toward creating great job opportunities and helping to grow Nebraska’s economy,” said Governor Ricketts. “Thanks to our team’s quality work in serving Nebraskans, our state continues to deliver tax relief as we maintain one of the strongest and most highly-ranked unemployment insurance tax systems in the country.”
Under the statutory formula, the reduction in unemployment benefit payments in 2018 and the healthy balance in the Nebraska Unemployment Trust Fund will result in Nebraska employers paying an estimated $4.3 million less in taxes in 2019 than they paid in 2018.
A dramatic decline in continued unemployment claims and benefits paid out led to the decrease in the unemployment insurance tax rate. The tax rate is based in part on the amount of unemployment benefits paid, and the amount paid declined from $80.65 million in fiscal year 2017 to just over $76 million in fiscal year 2018, including $68.87 million paid by taxable employers. The amount of benefits paid was almost $108 million less in 2018 than in 2011. While total benefits and claims decreased from 2017 to 2018, the maximum weekly benefit amount increased from $408 in 2017 to $414 in 2018.
Nebraska continues to enjoy favorable unemployment tax rankings in the Tax Foundation’s State Business Tax Climate Index. The Tax Foundation ranked Nebraska’s unemployment insurance taxes in the top ten in the nation for 2019 and among the top states in the sub-index measuring how well states ensure not only that unemployment costs are shared by all employers, but also that high-turnover employers pay more. Nebraska is also among the states recognized for having the lowest minimum and maximum tax rates.
REEMPLOYMENT PROGRAM SUPPORTS TAX REDUCTIONS
Governor Ricketts credits Nebraska’s first-in-the-nation reemployment program, launched in October 2015, for supporting the latest decrease. In calendar year 2016, unemployment benefits paid out declined by 17.4 percent year-over-year compared to a decline of only 1 percent nationally. During the same time, continued unemployment claims fell by 22.2 percent in Nebraska versus a national decline of 6.2 percent.
“The positive effects of the reemployment program have continued to pay dividends for Nebraska,” said Commissioner of Labor John H. Albin. “As of October, the number of Nebraska workers exhausting their claims is one-third less than the national average, 25.38 percent vs. 35.32 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.
ABOUT THE UNEMPLOYMENT INSURANCE TAX
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 2019 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.