The Federal Unemployment Tax Act surtax is set to expire Thursday after House Republicans refused to extend the 35-year-old “temporary” unemployment surtax.
Dave Camp
The surtax has been extended eight times since it was originally enacted in 1976. House Ways and Means Committee Chairman Dave Camp, R-Mich., refused to extend the tax beyond its current June 30, 2011 expiration date.
“The death of any tax on jobs—no matter how big or small—is a historic moment and one to be celebrated,” Camp said in a statement. “The fact that it has taken 35 years for this ‘temporary’ tax to expire clearly illustrates the dangers of higher taxes—once in place, they are unlikely to ever go away. We need employers paying more salaries, not paying higher taxes. And when the surtax expires, job creators will get a little and long overdue relief.”
The original purpose of the “temporary” 0.2 percent surtax was to repay federal general revenues used to provide federal unemployment benefits paid in the wake of the 1973-75 recession. While the tax raised $27 billion (adjusted for inflation) and the general revenues were fully repaid by 1987, the 0.2 percent surtax remains on the books today. Since 1987, the tax has raised an additional $46 billion (adjusted for inflation) above and beyond what was needed at the inception of the tax in 1976.
The expiration of the surtax will reduce federal unemployment taxes by $1.4 billion per year, or about $14 per employee per year. That relief slightly offsets the effect of much larger state unemployment tax hikes imposed in recent years to pay for record unemployment benefit spending. Since unemployment benefits are not directly linked to the “temporary” federal tax, its expiration will not affect current or future unemployment benefit receipts.
Without the 0.2 percent surtax, the 6.2 percent FUTA tax rate will fall to 6.0 percent, according to CCH. It was last extended in 2009 as part of the Worker, Homeownership and Business Assistance Act.
Camp's office provided a timeline of the successive extensions of the surtax.
7 Comments
"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one preson receives without working for, another person must work for without receiving.
The government cannot give to anybody anything that the government does not first take from someody else.
When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what the work for,
that, my dear friend, is the end of any nation. You cannot multply wealth by dividing it." - Dr. Adrian Rogers, 1931
Personally, just shut off all income to all legislators once they are no longer in office. We would save a fortune. Then make them take the same insurance as the rest of us and pay into social security.
Posted by: Lenore | July 2, 2011 6:53 PM
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To jbetatum: And are you to be the sole Judge and Jury as to who is working the system, as opposed to those who have worked diligently for years only to have a business close, move overseas for cheaper labor or become unemployed for any other of numerous reasons, to make the decision as to whether this person deserves some help, i.e., entitlement, of be put out to pasture, i.e., in the street?
Don't throw the baby out with the bath water.
Posted by: Tedego | July 1, 2011 3:44 PM
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To taxsolutionspc, I would suggest a clear examination of "needed services/benefits". How much is actually needed and how much is political lobbying, jockeying and gerrymandering? If you don't think the "needed services/benefits" isn't special interests, think again. As to tax breaks, every little group gets some kind of tax break of some kind. I've prepared tax returns for individuals that worked just long enough during the year to receive the maximum benefit from earned income credit. They knew exactly how to "work" it. I agree with JohnAMiller-"there needs to be a limit to the entitlement attitude". Amen.
Posted by: jbetatum | July 1, 2011 12:43 PM
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The FUTA Tax is used to pay for the administration of State Employment and Unemployment services, not for benefits, and to loan funds to State Unemployment Insurance Funds that have cash flow problems.
Posted by: Raymond S | July 1, 2011 12:38 PM
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It seems counter-intuitive to me that if you reward someone for not working that they will want to get a job. There needs to be a limit to the entitlement attitude. Life does not owe you anything except the opportunity to create your own opportunities. And endlessly taxing the hard-working members of society to support the non-workers is not fair to the hard-workers. Frankly it is not fair to the non-workers either as they do not enjoy the satisfaction of producing. Even many people with serious disabilities find creative ways to be productive and inspirational to us all. Remember what Mom and Dad taught us. God blesses those who help themselves. Necessity is the mother of invention. Give a man a fish and he eats dinner, teach him to fish... And so on. Let's get off our butts and fix this society. It needs a lot of work.
Posted by: JohnAMiller | July 1, 2011 12:13 PM
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So, how much sense does this make? Unemployment payments have been at an all-time high over the last two year and we are lowering what businesses have to pay toward the unemployment fund? That seems counter intuitive to this CPA. How does anyone think we can continue to push all our taxes lower and have government provide the needed services/benefits we all expect? When will Congress "get real", stop serving the special interests, and stop giving tax breaks to the rich who don't need them?
Posted by: taxsolutionspc | July 1, 2011 10:56 AM
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If your company paid their state unemployment tax returns on time for each of the 4 calendar quarters, then the federal government gave you at 5.4% credit against the former 6.2% FUTA leaving a balance of .8% due for the FUTA. For all 35 years, it paid to be on time.
Posted by: PASCPA1 | July 1, 2011 10:37 AM
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