NFIB Action yields unemployment insurance tax break for small business.
We’re starting 2020 off with some good news: Michigan small businesses will see a reduction in their unemployment insurance taxes this year. That’s because the state paid off the remaining bond balance that was the source of the “obligation assessment” charge paid by employers in their unemployment insurance taxes. The debt was paid off ahead of schedule in December 2019. The amount of the decrease will depend on the experience rating of each employer, however, the minimum savings is $65 per employee and could be as much as $217 per employee for some small business owners.
History: After the 2007 recession, Michigan’s Unemployment Insurance Trust Fund (the fund from which benefits are paid to unemployed workers) was depleted. However, benefits continued to be paid as required by state and federal law resulting in a $3.2 billion debt owed to the federal government. Michigan’s unemployment insurance system is 100% funded by taxes on employers, which means as the amount in the Trust Fund declines, taxes are increased to restore the balance.
In 2012, the Snyder administration, alongside business groups including NFIB, pursued a plan to issue private market bonds to pay off the $3.2 billion debt owed to the U.S. Treasury. The bonds carried a lower interest rate than what was being paid to the federal government. In addition to the interest savings, Michigan employers avoided substantial and steadily increasing federal taxes and penalties to repay the debt and interest.
