Business owners are facing a double whammy tax increase to cover payments to unemployed workers.
First, starting this month, businesses can expect $9.52 per employee surcharge to help repay interest on the remaining $1.5 billion of the $2 billion that Florida had to borrow from the federal government when the state’s unemployment fund ran out of money in the midst of the recession. Then, in January, businesses will face new state unemployment rates that will be dramatically higher than currently.
Although the tax rate for 2012 hasn’t been calculated, the base unemployment tax is likely to be close to $200 per employee annually, which would be 24 times the 2009 base tax of $8.40. The base tax is what businesses that have the best unemployment history pay.
So a business that employs 30 workers and has a minimal number of unemployment claims will see its unemployment tax rise from a total of $252 in 2009 to $6,286 in 2012.
“Companies that have done nothing wrong are being penalized,” argues Bob Walther, president of Gainesville-based Wal-Staff Personnel Services, which among other services, manages workforces for clients. “Businesses that employ a lot of people are being very affected by this avalanche of higher taxes.”
Sander Kaplan, co-owner of Burger King franchisee Deb-Lyn, Inc., and owner of A Candies Limousine, Inc., calls the unemployment taxes on his 425 employees “outrageous.”
“We need less government involvement in small business, which is so important to our country,” he says. “This is another example of how our costs are rising while our margins are getting thinner and thinner.”
In this year’s session, the state legislature passed a reform package aimed at slowing the climb in unemployment taxes, but the legislation won’t help much, says Kurt Wenner, vice president of tax research for Florida TaxWatch.
“The system is a little better, but the legislation won’t do a whole lot to offset the huge affect that high unemployment has had on what employers are paying,” he says.
The Legislature limited the number of weeks of support unemployed workers can receive and will tie the number to the unemployment rate. The number of weeks will drop to as low as 12 if the unemployment rate is 5 percent or lower. A week will be added for every 0.5 percent the jobless rate climbs, with the maximum weeks being 23 weeks when the jobless rate is 10.5 percent or higher.
Beyond the benefits covered by the tax on employers, the federal government is providing emergency benefits, which extend for some of the unemployed for up to 99 weeks through Jan. 7, 2012.
The legislation also makes it easier for a business to show employees were fired for cause, preventing them from receiving benefits.
Florida TaxWatch believes the tax increases are counterproductive. “These increases will make it more difficult for employers to hire new employees—or even keep all current ones—and help turn the economy around,” Werner says.
The maximum amount an unemployed worker can collect remains at $275 a week, among the lowest of any state in the country.
The changes that the legislature adopted to tighten benefits have drawn fire nationally. “Florida is going further than any other state in dismantling its unemployment insurance system,” stated a report by the National Employment Law Project.