Alabama Governor Kay Ivey announced on Thursday that Alabama employers will be getting a major tax cut on how much they have to pay in federal unemployment insurance taxes. Alabama Department of Labor Secretary Fitzgerald Washington explained that most Alabama employers will see a 54 percent tax cut in their 2023 unemployment insurance taxes, and the state has dropped into the lowest tax rate schedule due to the state’s low unemployment rate.
“This announcement today is further proof of how well Alabama is recovering from the pandemic — not in nearly thirty years have our employers seen a UI tax schedule at the lowest level – and the rates are the lowest in history, to boot,” Gov. Ivey exclaimed in a statement. “Our economic decisions during this time of national economic uncertainty are paying off — by putting more money in employers’ tills and allowing them to hire more Alabamians, benefiting the state as a whole. I’m beyond proud to lead an administration delivering real, effective tax savings to our people.”
“Following the economic uncertainty and the record-breaking amount of unemployment compensation benefits paid out during the pandemic, it is absolutely remarkable that we have been able to lower taxes for employers and drop to the lowest tax rate schedule in this short amount of time,” said Washington.
This is the first time Alabama has dropped into Schedule A, the lowest tax rate schedule, since 1997. This year’s average tax rate is also the lowest in recorded history.
Additionally, no shared costs will be incurred by employers this year, following several years of shared cost collections related to the pandemic.
The current Alabama Unemployment Tax Schedule consists of four tax rate schedules: A, B, C, and D. The original intent of the four schedules was to assist in the recovery of benefit costs so that the Unemployment Insurance (UI) Trust Fund, from which benefits are paid, will neither become depleted nor collect excess revenue. The objective is to maintain an adequate balance so that benefits can be paid when necessary. Therefore, the balance in the trust fund determines which schedule will be in effect for the upcoming calendar year.
The trust fund was flush with funds at the end of 2019 due to the booming economy and low unemployment, but then COVID-19 hit, and forced economic shutdowns forced millions of Americans to stay home and live off of their unemployment benefits. Alabama’s economy reopened faster than many states, but the months of people drawing benefits depleted the fund. Alabama employers have had to pay higher rates in 2021 and 2022 to replenish the UI Trust Fund. Record low unemployment rates in 2022 meant that relatively few people were drawing benefits in 2022. If those rates remain near record lows, these lower tax rates will put more money into the hands of Alabama businesses.
“Lower taxes allow businesses to hire more employees and spur spending,” explained Washington. “This record low tax rate is further evidence of Alabama’s economic recovery and shows how resilient we have been as a state.”
Business owners can now download their individual 2023 unemployment insurance tax rate notices online.
Customers should log in to their eGov account to see their rate. Unemployment Insurance taxes are paid 100% by employers on the first $8,000 of wages earned per employee. Shared costs are those benefit charges which cannot be attributed to any one employer and are shared by all employers in the state of Alabama. This is necessary due to bankruptcies and business closings which are born by Alabama employers as a group and are divided among employers who remain active entities.
Kay Ivey will be inaugurated into her second term on January 16. Ivey emphasized her ability to recruit new businesses to the state of Alabama and the robust economy that the state has enjoyed during her tenure during her campaign.
The Ivey administration emphasizes that under Ivey’s leadership, the state enjoys the lowest unemployment in state history, has received over $32 billion in new capital investment, has created over 65,000 good-paying jobs, and has the most people employed in state history.
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