PROVIDENCE – Rhode Island’s unemployment insurance tax system was ranked as the second worst in the U.S., only above neighboring Massachusetts, according to a Tax Foundation report released on Tuesday.
This was the second straight year the Ocean State was ranked 49th. Rhode Island was ranked 31st in 2020 and 29th in 2019. However, Massachusetts has been ranked 50th for four consecutive years.
The Washington, D.C.-based, tax-policy nonprofit measured each state’s rate structure and tax base to determine ranking.
The study noted climates created by UI policies can differ greatly. Some states have high statutory minimum and maximum tax rates that apply to large taxable wage bases, while others have low minimum and maximum rates and low taxable wage bases. A 10% tax on a $7,000 wage base raises $700, while the same rate on a $49,800 wage base generates $4,980.
As of July 2021, Rhode Island had a minimum 1.2% rate and maximum of 9.8% with a taxable wage base of $24,600. Massachusetts had a minimum rate of 1% with a maximum of 14.43%, with a taxable wage base of $15,000. A spokesman for the Tax Foundation did not immediately return a call seeking more information on the steep decline in Rhode Island’s ranking the past two years.
Following Massachusetts and Rhode Island, Kentucky, Idaho and Maryland rounded out the five worst unemployment insurance systems in the nation. The study found all five tend to have rate structures with high minimum and maximum rates and wage bases above the federal level. They also tend to feature more complicated experience formulas and charging methods and have added benefits and surtaxes to their systems.
Oklahoma was ranked the top in the nation, followed by Florida, Delaware, Louisiana, Mississippi and Michigan. The study found those states tend to have rate structures with high minimum and maximum rates and wage bases above the federal level. They also tend to feature more complicated experience formulas and charging methods, and have added benefits and surtaxes to their systems.
As for the rest of New England, Vermont was ranked 15th, Connecticut was 22nd, Maine was 35th, and New Hampshire was 44th.
The report can be found here.
