Tax cut » Those at the top rate could see thousands in tax breaks.

By Robert Gehrke

| The Salt Lake Tribune

Chris Buckingham said his goal at Canyon Craft Cabinets has been to build a business that would be "an asset to the community and provide a modest living to my family."

But when the housing market crashed, his company went from building cabinets for one new home a day to one a week. Revenues fell from $2.9 million a year in 2007 to $960,000 last year, and he had to lay off two-thirds of his workers.

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"I hated the thought of taking away another man’s income," said Buckingham. "We had no choice."

At the same time, because he had been forced to lay off 22 people, Buckingham said his unemployment insurance premium had shot up from $450 a year to an estimated $19,000 in the current year.

A bill that Gov. Gary Herbert signed into law Thursday will give a tax break to Buckingham and businesses like his who have seen their unemployment taxes go through the roof.

"It’s not enough to save us, but it will help keep us in business," Buckingham said of the reduction, which he expects will be a few thousand dollars.

Herbert rolled out the $26.4 million tax cut as part of his budget in December, even though the state’s unemployment trust fund had plummeted from more than $800 million to less than $300 million during the recession and months earlier had been projected to go broke.

Bill Starks, director of unemployment for the state, said a number of unemployment trust funds around the country did end up going bankrupt, forcing the states to borrow money from the federal government or issue bonds to cover the obligations.

But the picture improved dramatically in the 18 months since Utah forecast its insolvency, for two reasons.

First, the rates businesses were paying spiked. Also, the unemployment rate has dropped faster than expected, resulting in fewer claims. Over the past year, Starks said, the trust fund has collected more money than it has paid out, and the forecast is for healthy times ahead.

"We’ve kind of turned the tide on it, and our long-term projections essentially showed that this wouldn’t have a negative impact," he said.

Still, the employers who had been forced to lay off workers, like Buckingham, had seen dramatic increases in their unemployment premiums.

"The reason it had increased so much," Starks said, "was because employers’ rates are kind of like car insurance."

Like a driver who has been in several accidents, a business that has had to lay off numerous employees will see rates increase.

A portion of the tax cut Herbert signed will go toward a permanent reduction in the maximum rate employers pay, from 9.5 percent to 7.4 percent. It will help about 2,700 companies and cost about $6 million of the total $26 million package.

The rest of the relief will be a one-time reduction for 60 percent of Utah businesses that are now paying the minimum rate.

The average unemployed worker receives $308 a week in benefits and stays on the program just shy of 15 weeks. The benefits for unemployed workers will not be affected by the change.