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Md. unemployment tax to drop by 70 percent for many businesses

Roughly half of Maryland employers will see their unemployment insurance tax drop by about 70 percent next year, the result of the state's rebound from the recession, the governor said Wednesday.

After an annual evaluation of the unemployment benefit trust fund, the state will drop rates to the lowest of five possible brackets under Maryland's jobless tax system, Gov. Martin O'Malley announced.


This is the second year the rates have fallen. As a result, a top-rated employer with 100 workers that paid $18,700 in 2012 will pay $2,550 in 2014.

The decrease reflects improved employment and the state's partial recovery from the recession and its aftermath, when Maryland employers paid at the highest rate to provide benefits to the swelling ranks of jobless workers.

Since 2010, when the trust fund balance fell to about $270 million from a pre-recession level of over $1 billion, the amount Maryland has in the account from which it pays benefits has more than tripled. As the health of the fund grows, rates fall. They are recalculated each year on Sept. 30.

Speaking at the Maryland Chamber of Commerce office in Annapolis, O'Malley praised employers for not pressing to scrap the rate schedule during the lean years of 2010-2012.

"Understanding that it meant some pain in the short term . . . they stuck to it," he said.

Kathy Snyder, president of the state chamber, welcomed the reduction. "It's fantastic news – great news for employers," she said.

Maryland employers paid some of the highest rates in the country during the three years after the economic collapse in 2008-2009. Those with the best unemployment ratings – reflecting strong retention of their work force – paid $187 per worker, while employers with the worst ratings paid as much as $1,147 per worker.

The rate for this year dropped to the third of five levels, with the best-rated employers paying $85 per worker.

For next year, the minimum rate — paid by about half of Maryland businesses — will drop to $25.50 per worker.

Officials said that would put Maryland among the less expensive states for employers in unemployment insurance costs.

Maryland's unemployment tax level had recently emerged as an issue in the gubernatorial race. At a recent forum on manufacturing, several candidates called for it to be reduced.

House Speaker Michael E. Busch said Maryland overhauled its unemployment system at the urging of the chamber in the mid-2000s under the administration of Republican Gov. Robert L. Ehrlich Jr. He said there was a strong feeling among business leaders that the previous system did not give proper credit to businesses with a good record of holding on to employees.

Busch said the system put a strain on business during the recession years but leaders were not eager to scrap a system they had worked to implement.

"As the economy improves and the job market grows, the benefits of the system they put in place is now paying a dividend," said Busch, an Anne Arundel County Democrat who led the House at the time of the change.


He said the tax cut would not affect unemployment payments.

"Benefits are still at the appropriate level," he said.