The Alabama Legislature passed a plan for spending American Rescue Plan Act (ARPA) funds on Jan. 27, 2022, directing $79.5 million of the state’s $2.1 billion ARPA allocation to replenish the state’s unemployment trust fund. Following the bill’s passage, Alabama Department of Labor Secretary Fitzgerald Washington announced the state dropped to a lower tax schedule and estimated employers’ state unemployment insurance tax burden would decrease 29%.
Alabama’s unemployment taxes vary depending on the solvency of the state unemployment trust fund. Due to the increase in unemployment claims during the COVID-19 pandemic, the fund was depleted. Without the $79.5 million allocation, unemployment taxes would have increased by about 3% in 2022.
Employers in Alabama have to pay state unemployment insurance taxes on the first $8,000 every employee earns each year.
