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Alternative Methods of Experience Rating Unemployment Insurance Employer Taxes
Author(s) -
Miller Michael,
Pavosevich Robert
Publication year - 2019
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/pbaf.12244
Subject(s) - payroll , unemployment , incentive , payroll tax , labour economics , economics , state (computer science) , actuarial science , business , accounting , microeconomics , economic growth , computer science , algorithm
For most states the methodology used for assigning Unemployment Insurance tax rates to employers arose when the program was first established in 1935. More than 80 years later, with evolving employment relationships, state systems have become outmoded. This paper critiques current experience rating methods and presents new methodologies that are much easier to operate and that improve the incentives for employers to increase employment. The proposed methods would assess taxes based on employment or payroll variation such that growing firms would have lower taxes. A simulation analysis illustrates the impact of the new methods on employer groups.