Eyewitness News Investigates

RI will cut unemployment taxes by $10M in 2018

PROVIDENCE, R.I. (WPRI) - Rhode Island employers will get a sizable cut in their unemployment-insurance taxes for the second year in a row in 2018, state officials announced Wednesday.

The R.I. Department of Labor and Training said a change in the formula for the tax, which funds jobless benefits, will reduce the amount employers pay by about $10 million in 2018. The reduction takes effect Jan. 1.

Rhode Island has long had some of the highest unemployment taxes in the United States. Last year, however, state lawmakers approved a proposal by Gov. Gina Raimondo to change the formula and reduce the levy. DLT said the new policy saved employers an estimated $30 million this year, meaning the two-year reduction will total $40 million in 2018.

"This tax relief will help businesses, especially small- and medium-sized businesses, invest in new equipment, new training and new staff," Raimondo said in a statement Wednesday. "It makes Rhode Island a more business-friendly state, and will help more Rhode Islanders get back to work."

The change has caught the attention of the Tax Foundation, a Washington think tank that advocates lower taxes. Rhode Island's position on the group's annual rankings of unemployment taxes jumped from 50th out of 50 in 2016 - the worst in the country, as it had been for years - to 23rd this year.

The mechanics of the unemployment-tax formula are complex.

All of the roughly 33,000 Rhode Island employers required to pay into the unemployment-insurance trust fund pay a rate based on how often their former workers tap into the fund for jobless benefits. The changes made last year allow for small reductions in the rates they pay.

DLT said the changes will not jeopardize the solvency of the trust fund, which had a balance of roughly $350 million as of Sept. 30. The program currently allows laid-off workers to receive between $51 and $707 a week in jobless benefits for up to 26 weeks, depending on how much they made in their old jobs and how many dependents they have.

Separately, DLT said the Temporary Disability Insurance (TDI) tax rate paid by workers will dip in 2018 for the first time in six years, from 1.2% to 1.1%, which the department said is the lowest rate since 1996. TDI taxes fund both that program and the fairly new Temporary Caregiver Insurance (TCI) program often used by new parents.

So far in 2017, the average weekly TDI payment has been $491 and the average weekly TCI payment has been $563, according to DLT. Benefits for those programs can range from $94 to $1,121 a week depending on a worker's circumstances.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes Nesi's Notes on Saturdays and hosts Executive Suite. Follow him on Twitter and Facebook

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