AUGUSTA, Maine — A falling unemployment rate means Maine businesses will save $30 million in unemployment taxes next year, according to a Thursday morning announcement from the Maine Department of Labor.
Next year, employers will see an annual decrease of between $19.20 and $169.20 in unemployment taxes paid per employee, with the average decrease being $64.80 per employee.
When workers are laid off through no fault of their own, they are able to collect unemployment benefits. That money comes from what’s known as the Maine Unemployment Trust Fund, which is funded by Maine businesses that pay an unemployment tax on the wages of each employee.
When Maine’s unemployment rate spiked in December 2009 at 8.4 percent, the number of people requesting unemployment benefits began to tap the fund’s balance. To keep the trust fund solvent, the unemployment tax had to be increased.
In 2009, businesses contributed nearly $84 million to the trust fund. However, Maine’s unemployment rate increased throughout the year, spiking at 8.4 percent in December.
The total benefits the trust fund paid out in 2009 increased 80 percent, from roughly $138 million in 2008 to $248 million. The next year, 2010, businesses contributed nearly $133 million to the trust fund, a 58 percent increase from the previous year, according to the labor department.
But the picture has brightened since then, Glenn Mills, chief economist for Maine’s labor department, told the Bangor Daily News on Thursday.
From a high of 8.4 percent three years ago, Maine’s unemployment rate has decreased to between 6.8 percent and 7 percent this summer.
“The [unemployment] rate and the number of unemployed has gradually trended down since the crisis a few years ago,” he said. “There’s less benefits going out and more tax collections.”
As a result, the unemployment tax rate businesses are required to pay will drop in 2014 to the lowest rate since 2009.
“Maine’s economy is improving,” Gov. Paul LePage said in a statement. “As a result of the positive trends in both job growth and reductions in the numbers of people receiving unemployment benefits, the tax rate for employers will drop two schedules.”
Employers pay unemployment taxes on the first $12,000 in wages paid to each employee. Each business’ rate is based upon the business’ unemployment insurance experience, taxable wages and past contributions in relation to those of other businesses. The 2014 minimum rate will be 0.73 percent per $1,000 paid an employee, the maximum rate is 6.8 percent and the average rate, which is also the new employer rate, per $1,000 paid per employee will be 2.58 percent, according to the labor department.
In real dollars, employers paying the minimum rate will see an annual decrease of $19.20 in taxes per employee paid at least $12,000 in wages. Employers paying the average rate will see a decrease of $64.80 per employee, and employers paying the maximum rate will see a decrease of $169.20 per employee, according to the labor department.
The labor department said employers should receive their individual 2014 unemployment tax rate notices in mid to late December. Employers with questions can visit the department’s website at http://www.maine.gov/labor/unemployment/tax.html.
“At a time when other labor costs are going up, the cut in state unemployment taxes will be welcome news for the thousands of Maine small business job creators,” David Clough, state director of the National Federation of Independent Business, said in a statement.
Click here for an interactive chart provided by the Maine Department of Labor.