The Obama administration is expected to propose a way for states to raise more money in payroll taxes to pay for the cost of unemployment insurance.
State unemployment trust funds would be able to raise the amount of wages subject to unemployment taxes from companies, from $7,000 to $15,000, starting in 2014, according to The Wall Street Journal.
However, under the plan, states would be able to avoid raising taxes on businesses for the next two years to cover the interest owed to the federal government on money borrowed to fund their unemployment benefit programs, according to the Washington Post. The administration would also suspend the automatic increases in federal unemployment tax that employers would have to start paying in many states before the end of 2012.
The plan to raise taxes on employers in 2014 has been receiving mixed reviews already, however, even before it is scheduled to be announced with the rest of the administration’s budget proposal next week.
“I strongly urge the White House to reconsider this job-destroying proposal,” said Senate Finance Committee ranking member Orrin Hatch, R-Utah, in a statement. “Either employers will have less money to hire or workers will face reduced wages. Neither makes any sense and runs counter to our shared goal of getting the American people back to work.”
House Ways and Means Committee Chairman Dave Camp, D-Mich., said the proposal would not be “going anywhere in the House.”
7 Comments
There seems to be a little confusion. The $7,000 wage base is for Federal unemployment taxes (FUTA). The states (such as NC) can set a higher wage base. Furthermore, in NC the state unemployment tax (SUTA) rate can be variable per employer depending on factors ranging from start-up status to former employees collecting unemployment. The only positive here (if any) is that payment of the SUTA tax helps lower the effective FUTA rate from 6.2% to .8%.
Posted by: nraacct | February 11, 2011 7:17 AM
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I, too, am asking "When will this administration understand?" In a related issue, I just got notice that my local school district is scrambling to cut teachers and assistants because it is now losing the money given in the American Recovery and Reinvestment Act. Government cannot keep handing out money that it does not have, whether for unemployment benefits, school teachers, or unnecessary building projects.
Posted by: firstpeter13 | February 10, 2011 4:56 PM
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Yes, the formal budget proposal hasn't come out yet from the White House, but from the way it's been described in the New York Times, the Wall Street Journal, ABC News and other outlets, states are currently required to collect unemployment taxes on at least the first $7,000 of wages, and it's been that way for decades. The budget proposal that's expected to come out next week would raise the minimum taxable wage base to $15,000.
Posted by: MikeCohn | February 10, 2011 11:54 AM
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I believe that the wage base in question is the federal wage base. It is, and has been, $7,000.00 for many years.
The story above is not clear. The WSJ is a little clearer.
Posted by: D Ray | February 10, 2011 11:39 AM
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Don't get it - the employers giving people jobs now have to also pay for the people with no jobs????? Which will of course lead to less employees and more unemployment.
Over taxing barely making it companies will NOT work.
No less these companies have no say in how much their state decides to give to unemployed individuals or when to give it to people that could work. Don't get me wrong there are many people in need. But pulling it from the companies keeping the economy running isn't the answer.
Agree with stop and cut spending. The movie "Dave" comes to mind.
Posted by: Lenore | February 9, 2011 11:27 AM
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I don't understand the proposal. The NC base is currently $19,700 and has always been more than $7,000 since the late 1980's. Is NC violating a federal statue?
Posted by: deacondave85 | February 9, 2011 8:06 AM
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When will this administration understand the economy ? The first major step in recovery is to STOP SPENDING. Reduce the cost of running the government and that means across the board cuts in number of employees, their salaries and benefits.
Posted by: benusmc | February 9, 2011 7:11 AM
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