Economic Growth and Anti-Fraud Programs lead to tax cuts for nearly 50 percent of employers

[December 02, 2014]  CHICAGO – Unemployment insurance tax rates will fall or remain at the minimum for most employers in 2015 because the economy is outperforming expectations used in 2011 reform legislation that created tools to prevent waste, fraud and abuse in the temporary assistance program, the Illinois Department of Employment Security said today.

“Falling tax rates are a tangible result of a growing economy and real reforms that protect taxpayer money,” IDES Director Jay Rowell said. “Allowing employers to keep more of their money to reinvest in their company and hire more workers is a direct way in which we can stoke job creation and put people back to work.”

Employers pay unemployment insurance taxes for each employee. In Illinois, 167,380 businesses, nearly 50 percent of employers that pay unemployment insurance taxes, will see tax rates decline. Further, more than 150,000 employers will pay the minimum rate of zero. The new employer rate will fall to 3.2 percent from 3.4 percent. The maximum rate will fall to 7.6 percent from 8 percent. The taxable wage base of $12,960 and fund builder rate of 0.55 percent remain unchanged.

State law sets out a formula to calculate employer tax rates. The amount of money leaving the Trust Fund to pay the temporary unemployment insurance benefits is a key measure. The formula also considers how long an employer has been in operation, the size of its workforce covered by the unemployment insurance program, and the amount of benefits received by former employees. The last significant changes to the formula were the product of bi-partisan legislation passed with near unanimity in November 2011.

Because the Trust Fund balance is stronger than anticipated, tax rates can go down.

The 2011 legislation did not anticipate the near across-the-board tax cut in 2015. However, fewer dollars leaving the Trust Fund in benefit payments plus greater-than-anticipated savings in some integrity measures, including the prevention of paying benefits to those who were working, the ability to hold business owners personally liable for knowingly misstating their liabilities to IDES, and a crackdown on employer misclassification, led to a more robust Trust Fund balance.

Three anti-fraud programs were critical to saving employer’s money and reducing taxes: The Inmate Cross match Program, National Directory of New Hires, and the Treasury Offset Program. The combined impact of these programs saved taxpayers nearly $500 million dollars. The nearly half-billion dollars is money either IDES recovered or prevented from being paid.

[Illinois Department of Employment Security]