(The Center Square) – Oklahoma's unemployment insurance tax system remains the best in the nation, according to a report.
The state has ranked number one for its unemployment insurance tax on the Tax Foundation's State Business Tax Climate Index since 2019.
Unemployment insurance taxes are less widely understood compared to other familiar taxes like individual, corporate, sales and property taxes, says Janelle Cammenga, one of the authors of the report. However, this less understood tax remains impactful for a state's overall business climate, according to Cammenga.
Money is raised for unemployment insurance benefits by taxing employers through a joint federal-state social insurance program. The taxes employers pay depend on how old a business is, its layoff history and other factors, Cammenga said.
The report determined least-damaging unemployment insurance tax systems are the ones that stay close to the federal taxable wage base, which is $7,000 per employee, have low minimum and maximum tax rates on each rate schedule, and avoid charging surtaxes or making benefit add-ons.
Systems deemed more difficult and "harmful" were those with high minimum and maximum rates with wage bases far above the federal level of $7,000 per employee, and have complicated experience formulas and charging methods, plus surtaxes or benefit add-ons.
According to the report, Oklahoma does a good job of avoiding these practices.
"Oklahoma ranks first in the nation for its unemployment insurance tax structure, as the state applies low tax rates to a relatively low wage base," Cammenga told The Center Square. "It also has a simpler experience formula and charging method than many other states, and has not complicated its system with benefit add-ons or multiple surtaxes. Oklahoma's wise unemployment tax structure ensures that the state's unemployment system is funded, but does not overburden businesses that are already hurting."
Other states that scored best for their unemployment insurance tax systems were Florida, Delaware, Missouri, Louisiana and Mississippi. States the report said had the worst structured systems were Massachusetts, Rhode Island, Kentucky, Idaho, Maryland and Nevada.
The Tax Foundation's report also ranked states based on other taxes levied in order to give a broad view of how well states structure their tax systems. The report's authors said this was in order to provide a road map for improvement.
Oklahoma ranked 26th overall after comparing five key taxes: corporate, individual, sales, property, and unemployment insurance. The state ranked 10th for its corporate tax, 30th for its individual income tax, 37th in sales taxes and 28th for property taxes, according to the report.
via Oklahoma's Center Square News