State Lawmaker Studies Oklahoma’s Unemployment Tax, Way To Make State More Competitive

Rep. Mark Tedford (R-Tulsa) is looking into possible changes to Oklahoma’s unemployment tax. The state representative from Tulsa recently held an interim study examining the impact of the tax on economic development.

In Oklahoma, the unemployment tax is money that every business is required to collect and pay to a state trust for each employee on their payroll. It's ultimately used for unemployment assistance and benefits if somebody loses their job.

“So if someone loses their job, gets laid off from their job, they can file for benefits for up to 16 weeks for a certain percentage of their wages,” said Tedford.

It’s a federal law but allows each state to create their own system. “You have the two main components that comprise the overall tax burden to an employer and that is the taxable wage base and then the rate,” said Tedford. 

Representative Tedford is looking at reducing the wage base and rate, hopefully lowering the unemployment taxes overall. “So that actually in some ways creates an opportunity for Oklahoma to really be efficient and effective in how we administer that system and to make overall our business climate better,” said Lepak.

Oklahoma's tax system actually ranks well nationally, with the Tax Foundation putting the state’s unemployment tax system as second best in the country. "That doesn't mean, though, that there's no way to improve, there are,” said Ben Lepak, CEO of the State Chamber Research Foundation. 

Lepak was one of the presenters in the interim study, looking at minor improvements that would make the unemployment tax a little less of a burden on employers. “As much as we can keep that tax low, the better off workers and businesses are whether they're already in the state or if they're looking to relocate,” said Lepak.

He suggested voluntary contributions from companies, or allowing companies to contribute additional funds when their unemployment taxes are low in order to offset higher rates in the future. “That's been a reform that's been successful in other states,” said Lepak.

With fewer people claiming unemployment benefits post-pandemic, this could be a good time to make these changes.

Rep. Tedford says he will be looking at legislation to run in the 2025 session, to look at lowering the rate and wage base.