First bill seeks to trim unemployment tax

BOISE, Idaho (AP) - The first bill introduced in the 2018 Idaho Legislature seeks to lower the amount employers pay in unemployment insurance taxes.

If it passes, the proposal introduced Thursday is expected to save employers a total of $115 million over the next three years by reducing a key component in how Idaho calculates the unemployment insurance tax rate. It would also reduce the cost of unemployment insurance taxes by 30 percent.

Gov. C.L. “Butch” Otter and officials with the Idaho Department of Labor say the change is needed because the trust fund Idaho uses to pay unemployment benefits has more money than it needs to survive an economic crisis. Currently, the fund is on track to have roughly $1 billion by 2020.

Idaho lawmakers were supposed to make the reduction last year. However, the bill got hijacked by legislative leaders who wanted to use the proposal as leverage for other tax cuts and in the end, the bill never made it to Otter’s desk for his signature.

“Most of you might recognize this bill from last year,” said Republican House Majority Leader Mike Moyle, of Star, to the House Revenue and Taxation Committee. “It’s largely the same, but includes some technical changes and an emergency clause to make it take effect retroactively as of Jan. 1.”

In Idaho, employers pay a state unemployment tax that goes into a trust fund which distributes unemployment benefits to workers. The unemployment insurance tax rate itself is determined by a complicated formula that includes factoring in a measure called the “average high-cost multiple,” or determining how long a trust fund can last in an economic recession.

The federal government says a state trust fund should be able to remain solvent for at least a year during a recession. Yet under Idaho law, this measure of how long the trust fund can last in troubled times has become much more conservative each year since 2011 and is on track to be above and beyond what the federal government recommends starting in 2018.

Currently, Idaho’s trust fund has more than $700 million and is expected to hit almost $1 billion by 2020 unless the legislation introduced Thursday is approved by lawmakers.

The total is a big bounce from 2008 during the Great Recession and was forced to borrow $202 million from the federal government after having to pay more than $400 million in unemployment benefits.