Most Florida businesses will get an unexpected hike in employee unemployment insurance taxes starting January 1, 2010. This problem will cascade into another fight for the total remaining Florida tax revenues, thus reducing the remaining funds for other agencies, including Schools, etc. (and, remember, Charlie Crist just approved the $600-million SunRail system, which will also compete for funds. Additionally,if Obama's health plan passes, it mandates drastic hikes in Medicaid payments for Florida and other states that have low Medicaid payments, thus that will "suck" more funds out of Florida State cash).
Below is a briefing sent out by the Eustis Chamber of Commerce that gives a good description of the tax hike, which significantly increases
bottom line costs for each employee. If you are business owner, you need to know about this tax, and perhaps take the actions requested by the Chamber.
If you are an employee, you need to understand how the State has used up their unemployment insurance fund to pay unemployment insurance, and has been borrowing $300-million per MONTH from the Federal government to continue paying unemployment payments. The tax hike means that your employer's cost will go up, which means that there will be another reason to layoff employees.
So, the Chamber action recommendations sound important, until you realize they only tell you to plead with Florida officials to lower the tax rate AND the underlying "wage base", which would reduce tax hikes to employers, BUT THEY DON'T SAY WHERE THE FUNDS WILL COME FROM TO CONTINUE UNEMPLOYMENT PAYMENTS. So, if the State reduces the planned unemployment tax hikes, they either need to stop paying unemployment insurance payments, reduce them, or take the funds from some other source like education.
I sympathize with employers, but this one sided plan pits employers against other agencies like Education, and a plan for alternative sources of funds should be part of the "plan", because I doubt the Florida officials would curtail or reduce unemployment benefits. Either that, or they need to pass legislation to drastically curtail unemployment payments since there is not enough targeted revenue to pay for them.
So, do you still like the cascading effects of a corrupt Congress and Obama's socialism? It will hit everyone in Florida after January 1.
vj
Issue Briefing ( emailed out by the Eustis, FL Chamber of Commerce):
Florida employers will face significant increases in their unemployment compensation taxes at a time
when they can least afford it. The new unemployment compensation tax rates have been calculated by
the Department of Revenue and will become effective January 1, 2010.
Background:
Florida employers pay unemployment compensation payroll taxes on their employees’ wages. These
taxes are deposited into the Unemployment Compensation Trust Fund and are used to pay benefits to
qualified employees who are unemployed through no fault of their own.
Florida’s unemployment compensation tax rates range from 1.18 percent up to 5.4 percent, based on
an employer’s history of laying off workers. The tax rate is currently applied to a wage base of $8,500
per employee. Florida employers are also required to pay unemployment compensation taxes to the
federal government. Federal unemployment tax is 6.2 percent on employee’s annual wages with a 5.4
percent tax credit if the state program meets federal requirements and does not have any outstanding
federal loans. Currently, Florida employers pay 0.8 percent in federal unemployment taxes.
Florida’s Unemployment Compensation Trust Fund uses automatic triggers to increase or decrease an
employer’s unemployment compensation taxes based on the trust fund’s balance. When it reaches a
low of 4 percent of taxable payrolls it automatically triggers a tax increase and when it reaches 5
percent of taxable payrolls it automatically triggers a tax decrease on Florida employers. When a
states’ unemployment compensation trust fund runs out of money it borrows from the federal
government to pay benefits.
What is driving this increase?
Florida’s October 2009 unemployment rate is 11.2 percent statewide. This is the highest level of
unemployment in 34 years and with this significant increase in unemployment also comes a
corresponding increase in unemployment compensation benefits paid from the trust fund, lowering the
trust fund balance below 4% of the total taxable payroll and triggering an automatic tax increase. In
addition to skyrocketing unemployment and increased payments for benefits, legislation passed in 2009
increasing an employee’s taxable wages from $7,000 to $8,500 to help shore up trust fund solvency.
On August 24, 2009 the trust fund balance was exhausted and Florida began borrowing from the
federal government to pay benefits. Florida is currently borrowing roughly $300 million a month from the federal government and has an outstanding advance balance totaling $737,700,000.There are currently 25 states and one territory borrowing from the federal government to pay benefits.
They include: Alabama, Arkansas, California, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana,
Kentucky, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Virginia, Virgin Islands and
Wisconsin. This represents $22.2 billion dollars in advances from the federal government. It is
estimated that by mid 2010 this will grow to 40 states needing federal advances.
What this means to your business:
The rate that an employer pays in state unemployment compensation taxes is specific to the business
and is based on a formula that also considers an employer’s three year experience. In 2009,
employers at the minimum rate paid $8.40 per employee. This will increase to $100.30 per employee
starting January 1, 2010. The new rate will bring in $2.5 billion in unemployment compensation taxes for FY 10-11 and represents a $759 million tax increase on Florida employers.For example, a 50 employee business with the minimum experience rating paid $420 in state
unemployment compensation taxes in 2009 and will now have to pay $5015 in 2010, representing a
1094 percent increase in their unemployment compensation taxes.
In addition to this staggering state tax increase, it is estimated that by January 1, 2012, to the extent we have federal loans that have not been repaid, the federal tax will also increase on Florida employers by 0.3 percent each year until those outstanding federal loans are repaid.
Have I Got Your Attention Now?
Where is the money coming from? It’s simple, your bottom line.
Five Ways you can make a difference:
1. Tell us how this increase will impact your business. Go to www.FloridaChamber.com
• Florida employers are on the front lines of this difficult economy. Letting us know how this
increase will impact your business and allowing us to share your story with Florida’s
legislative leaders helps our united effort to reduce this tax increase in 2010.
2. Call your State Representative and State Senator and ask them to take action now!
• Tell them how this unemployment compensation tax increase will impact your business.
• Ask them to reduce the tax increase and lower the wage base in a special session.
• If you don’t know who your state legislators are, please contact Faye Brainard at
[email protected] to get this information.
3. Email to Governor Crist at [email protected]
• Tell your story and ask him to call a special session to reduce the tax increase and lower
the wage base.
4. Write a letter to the editor in your local paper about the impact of this tax increase on your
business.
5. Get 10 other employers in your area to join the fight by telling us at www.FloridaChamber.com
how this tax increase will impact their business.
Eustis Area Chamber of Commerce
http://www.EustisChamber.org
1 W. Orange Ave.
Eustis, FL 32727
352-357-3434
