Michigan Nursing Home Administrator (NHA) Practice Exam

Which component of unemployment tax is most likely to vary over time?

1. Federal portion

2. State portion

3. Gross payroll

4. Taxable wage base

The correct answer is: State portion

The state portion of unemployment tax is most likely to vary over time due to fluctuations in the state's unemployment insurance program and its funding needs. Each state administers its own unemployment insurance system, which can be affected by various economic factors, including changes in the unemployment rate, the number of claims filed, and legislative adjustments to tax rates or benefits. As the economy shifts or if a state experiences an economic downturn with rising unemployment, the state may need to adjust its tax rate to maintain adequate funding for unemployment benefits. Conversely, during periods of low unemployment, states might reduce their rates or adjust other program components. This variability in the state portion can reflect the overall economic climate and the financial requirements of the unemployment insurance system in that specific state. The federal portion is generally more stable, as it is set by federal law and changes less frequently. Gross payroll can fluctuate based on a business's operations, but it does not directly determine tax rates. The taxable wage base, while it can be adjusted by states, tends to remain consistent within a given year and is less responsive to immediate economic conditions. This makes the state portion the most dynamic component compared to the others listed.