The Nevada Employment Security Council says a state unemployment tax should be reduced in 2008 in a small step to help stimulate Nevada's slowing economy.
Panel members voted unanimously Tuesday to lower the average tax rate to 1.33 percent in January, a move that would save employers about $12 million a year. The tax has been 1.38 percent for the last three years.
A reduction "will provide an economic stimulus, albeit a small one," Employment Security Commission Administrator Cindy Jones said, adding that the system was set up to collect higher taxes in good economic times and lower taxes when the economy isn't performing as well.
Even with the drop in the rate, a trust fund that gets the tax revenue is expected to increase to $865 million by the end of 2008, up $65 million from the end of 2007. The fund is used to pay jobless benefits to laid-off employees.
The actual tax paid by individual employers varies from 0.25 percent to 5.4 percent depending on a company's history of laying off workers. The tax is collected on the first $25,400 of each employee's wage. New companies pay a rate of 2.95 percent. Employers pay the entire tax, and nothing is deducted from employee wages.
The Employment Security Council is made up of private business and state agency leaders who recommend tax changes to Jones. She will set the actual rate in November.
The recommendation to reduce the tax came during a meeting in which state economist Jim Shabi described how a drop in home construction over the last 16 months has caused the entire state economy to decline.
Unemployment in September was 5 percent, higher than the national average, and Shabi predicted a rate of 5.1 percent in both 2008 and 2009.