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Governor Moves to Provide Payroll Tax Relief

January 18, 2013, Juneau, Alaska – In a move to allow Alaskans to keep more of their paychecks, Governor Sean Parnell today introduced legislation to allow for the suspension of Unemployment Insurance (UI) tax contributions when the UI fund is deemed solvent. Existing UI laws allow no flexibility and mandates increased tax collections from employers and employees, even when the trust fund is healthy.

“Given the federal government’s decision to escalate payroll taxes on lower and middle class workers and increase taxes on small business owners, it makes no sense to require Alaskans to pay more and more for unemployment insurance when the UI fund is financially sound,” Governor Parnell said. “With this bill, we can help Alaska workers and business owners ensure that we, as a state, are not overtaxing Alaskans.”

By allowing Alaskans to keep more of their dollars, more consumer spending will be created and greater investment will be made by local businesses, spurring job creation throughout the state.

The UI tax rate for Alaskan employees and employers is determined by a formula in state law. The three determining factors in the formula are: the UI trust fund balance, the amount paid out in regular state unemployment benefits, and the amount of wages paid to employees of taxable employers.

The Alaska UI Trust Fund had a balance of $263 million on September 30, 2012, and remains solvent.

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