Unemployment Insurance Taxes Increases Are Coming – Can a PEO help?
Unemployment Insurance Funds Are Broke
As of December 2010, 26 states have Unemployment Insurance funds that are insolvent and are borrowing money from the federal government. Current state borrowing to cover UI payments is over $30 billion. See this website to see if your state UI funds is in trouble: Unemployment Insurance Tracker.
As politicians keep extending unemployment benefits the situation continues to get worse. In fact many UI funds have not even paid off loans from the borrowing done in the late 1970s. This means is that UI funds in 2011 and beyond will be forced to raise the SUTA taxes charged to business throughout the USA. Remember that UI costs are paid by businesses. Nearly every company will be forced to pay higher State Unemployment Taxes, even if they have never laid-off anyone. Every company needs to take steps to minimize the coming impact of higher SUTA expenses.State UI funds borrowing more money than ever.
Government Writing Checks that Business Owners will Pay
Even if the unemployment situation of the last several years starts to improve, the tremendous debt incurred by most states UI funds must be repaid to the federal government. Where will they get the money? You guessed it, increased State Unemployment Taxes (SUTA) charged to business owners. The politics of taxation will create a battle over how to recover the tax funds shortfalls. Battles are coming over who should pay more.
- Increase the SUTA wage base
- Increase the SUTA minimum rate
- Increase the SUTA maximum rate
- Increase the SUTA new business rate
- Make special assessments for business
States have options for collecting more SUTA taxes including:
This method affects virtual all businesses.
This method affects long time busineses that have worked hard to develop a SUTA experience rate and keep low by holding on to their employees.
This method will collect more from companies that have already let go lots of people. Many of these companies may decide to cease operations if the SUTA rate increases make them uncompetitive.
This method affects all start up business and is unpopular since it discourages new busniness formation.
Anything can happen with this, but it does give new businesses a break and punishes existing businesses.
Whatever method or combination of methods the states eventually select, the fact is Unemployment taxes will increase.