Governor Announces Reduction in Unemployment Tax

Oregon employers will save $64 million in 2007, thanks to a recovering economy and tax cut.

(SALEM) - Oregon Governor Ted Kulongoski announced Thursday a change in the tax rate schedule for unemployment insurance that will cut next year’s unemployment taxes by $64 million, thanks to a bill the Governor introduced during the 2005 legislative session.

“The tax savings will provide a real boost to Oregon’s employers, which will help offset the effects of our automatic increase in the minimum wage,” the Governor said. “The reduced rate won’t affect unemployment benefits, but it will certainly reinforce the economic recovery that’s under way in Oregon.

It will make existing jobs more secure and strengthen incentives for employers to create even more new jobs.”

Beginning in January 2007, the state will assess employers under Rate Schedule 3, meaning they will pay the unemployment tax on 1.97 percent of taxable income, on the average. Presently, employers pay the tax on 2.28 percent of taxable income under Rate Schedule 4, on the average.

The tax cut results from HB 2127, which the Governor introduced last session and signed into law on June 8, 2005. The bill received support both from business and labor.

“Oregon’s economy is one of the fast-growing state economies in America, and more Oregonians have jobs today than anytime in our state’s history,” the Governor said. Lower unemployment means less demand for unemployment benefits, and lower costs for employers, the Governor added.

“Even though Oregon has gained more than 117,000 new jobs in the past three years, my goal is to ensure that more Oregonians share in the benefits of our economic recovery,” the Governor said. “One way to do that is to reduce the expense of unemployment insurance and help employers add new jobs.”

Oregon law provides eight rate schedules to assess employers for unemployment insurance taxes. The rate employers pay depends on their individual histories of paying unemployment benefits. The change in the rate schedule does not necessarily mean every employer will pay less.