The Unemployment Line
                                                                         On Demand Issue: 1 
November 22, 2013 - In This Issue:
WHAT IS FEDERAL UNEMPLOYMENT TAX ACT (FUTA)?

The Federal Unemployment Tax Act (FUTA), with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs. 


Most employers pay both a Federal and a state unemployment tax.

 

Only the employer pays FUTA tax; it is not deducted from the employee's wages. 

FUTA TAX INCREASE COULD CAUSE HUGE POTENTIAL COST TO EMPLOYERS!

 

Per Strategic Services on Unemployment & Workers' Compensation (UWC), a national business organization devoted to representing employers before public policymakers regarding unemployment issues, the Congressional Budget Office (CBO) has just published "Options for Reducing the Deficit:  2014 to 2023".  Option 22 of that document proposes to "Increase Taxes that Finance the Federal Share of the Unemployment Insurance System".  

 

Us4U wanted to communicate this to you as quickly as possible as it could have a huge potential cost to employers. 


The proposed Federal increase is the result of insufficient repayment of emergency and extended unemployment benefits advanced to federal accounts and States with insufficient funds to pay regular benefits to claimants.  Two alternative approaches have been suggested:

 

1. Permanently increase the FUTA tax rate to .8% (currently .6%) against a wage base of $7000.  For those employees earning at least that amount annually, this constitutes a $14/year increase;


2
. Increase the FUTA tax base to $14,000 (currently $7000), index that wage base to future wage growth, and decrease the FUTA rate to .33%.

 

Either option would generate approximately $15 billion through 2023. Most importantly, federal law requires that each State's taxable wage base must be as much as the federal wage base.  If option #2 above were implemented, 27 States would be required to increase their taxable wage bases, all being currently below $14,000.  California, for instance, would see a 200% wage base increase as their current base is $7000.  This change could substantially alter and increase your State UI tax burden.

Note that these options are proposed to be effective 1/1/2014.

 

Us4U awaits further information from UWC regarding responses and updates, but wanted to forward this information for your consideration. If you are interested in more active involvement in responding to these proposed options, please contact:

                 
       Douglas J. Holmes, President

Strategic Services 

Unemployment & Workers' Compensation

                     910 17th Street, NW, Suite 1070

                         Washington, DC 20006

                               202/223-8904

                       holmesd@uwcstrategy.org

 

Contact:
Jennifer Casanova

Be sure to add info@us4u.us to your address book or safe senders list so our email can get to your inbox.

800.928.5750 
Ext. 4 
STAY CONNECTED

         Like us on Facebook   Follow us on Twitter