As if employers’ bank accounts haven’t been stretched thin enough already, it looks like businesses may be staring down the barrel of more tax increases.
The Obama administration is proposing that the wage base for the Federal Unemployment Tax Act (FUTA) tax that employers pay be increased from $7,000 to $15,000.
Under the proposal, an employer’s maximum FUTA contribution per employee would increase from $434 to $930. If it’s passed, the increase would become effective in 2014.
Currently, employers pay 6.2% in taxes on the first $7,000 in earnings paid to each worker. Those taxes are not deducted from employees’ pay, but paid directly by employers.
Funds drying up
The reason for the proposed increase: State unemployment funds are shrinking and the tax hike would help solve the problem.
High levels of unemployment have depleted several states’ unemployment trust funds. As a result, states have taken out nearly $40 billion in loans from the federal government to allow them to continue paying unemployment benefits.
Congressional Republicans have opposed the tax hike, saying the added cost would hurt the economy and job growth. House Majority Leader Eric Cantor (R-VA) has suggested suspending the FUTA tax and making up the difference — nearly $7 billion — with spending cuts.
Do you think the FUTA tax increase is a viable way to replenish unemployment funds? Share your opinions in the Comments Box below.
