Florida unemployment compensation tax on businesses to skyrocket due to high jobless rate

By Bill Kaczor, AP
Thursday, November 19, 2009

Fla. unemployment tax on businesses to skyrocket

TALLAHASSEE, Fla. — Unemployment compensation taxes paid by Florida businesses will skyrocket next year due to the state’s high jobless rate that hit 11 percent in September, revenue officials said.

The minimum tax will jump from $8.40 per employee to $100.30 — an almost 12-fold increase — while the maximum will go up from $378 per employee to $459.

The exact amounts for each business will be based on a formula that includes benefits paid to its former employees over the past three years.

Under a worst-case scenario that would mean a $3,672 tax bill for Tallahassee builder Ed Dion, who has eight workers. Dion’s payment for this year was under $400, but he expected it to go up somewhat because he’s had to pay benefits for two former employees since that rate was calculated. He said he isn’t sure he has the money to cover such a big increase after going through his life savings to keep his business afloat.

“It becomes a point where it is no longer profitable to have employees,” said Dion, who specialized in remodeling. “I’m in a situation where I have to decide between putting food on my table or putting people on the street.”

Florida is among 33 states that will increase unemployment compensation taxes next year, according the National Association of State Workforce Agencies.

“The main driving factor in all of this, unfortunately, is the recession,” Robert Babin, legislative service director for the Florida Department of Revenue, said Wednesday. “Of course, the citizens need the aid.”

The increase in Florida is automatic under state law. It was triggered when the balance in the state’s Unemployment Compensation Trust Fund fell below 4 percent of taxable payroll on June 30. The trust fund dropped from more than $1.3 billion last year to zero in August. Since then the state has been borrowing $300 million a month to pay unemployment claims.

Another factor contributing to the increases is that taxable wages are going up from $7,000 to $8,500 per employee. The Legislature made that change at the request of business interests to help replenish the trust fund quicker. Without that change the maximum rate would have remained unchanged.

Raising the state tax is expected to save Florida employers from a federal increase. Employers also pay a federal unemployment tax of 6.2 percent of annual wages, but they get a 5.4 percent credit for a net of 0.8 percent if their state’s program meets federal requirements and doesn’t have any delinquent federal loans.

“It’s going to come one way or it’s going to come another way,” said David Daniel, vice president of governmental affairs for the Florida Chamber of Commerce. “It’s pay me now or pay me later.”

Democrats criticized the Republican-controlled Legislature for refusing to approve expanded benefits that would have tapped into an additional $444 million in federal stimulus money for unemployment compensation.

As of Oct. 10, nearly 773,500 unemployed Floridians had received $843.5 million in stimulus money, according to the Agency for Workforce Innovation.

“Our state has left critical stimulus dollar on the table,” said U.S. Rep. Kendrick Meek of Miami, who’s also a candidate for the U.S. Senate. “These hard-to-come-by funds are desperately needed to help Florida’s families.”

Expanding the program, though, would have meant even higher taxes for employers because the $444 million would have paid for less than two months of benefits, said Florida Retail Federation President Rick McAllister.

The tax increase will be an added burden for many small business already suffering due to the recession, McAllister said.

“It could be the tipping point for some,” he said. “It could keep the five-employee business from adding a sixth.”

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