Second thoughts on unemployment tax hike

Second thoughts on unemployment tax hike

By JOHN KENNEDY | THE NEWS SERVICE OF FLORIDA

TALLAHASSEE — Florida business groups are pressing lawmakers to stop a skyrocketing increase in the state’s unemployment compensation taxes, but are being told they need to come up with a better approach than just turning back time.

Business associations unanimously supported changes approved by lawmakers last spring that are now contributing to what these same groups now deride as a twelve-fold increase in the minimum annual rate charged to employers.

Those leading the charge, the Florida Retail Federation, National Federation of Independent Business, and the Florida Chamber of Commerce, effectively want lawmakers to erase the tax hike – and borrow more from the federal government to replenish the collapsed trust fund that pays Florida’s 1 million unemployed.

That’s looking like a no-sale with lawmakers from both parties.

“It looks like they did the math wrong when they said they supported this,” Senate Democratic Leader Al Lawson of Tallahassee told the News Service of Florida. “But these groups that complain about the growing size of the federal government now want us to just borrow more?”

But Randy Miller, executive vice-president of the Florida Retail Federation, said lawmakers will be hearing plenty in coming days from their hometown businesses. State tax notices are scheduled to be sent to businesses beginning Thursday of this week.

Payments are due next spring.

“Sure, we don’t like to see big government, but this is a job-killer,” Miller said. “If we put this increase on top of an economy that is only barely getting by, employers aren’t going to be able to hire anyone.”

The minimum annual rate –charged by the state to employers with a strong record of keeping employees – will rise from $8.40 per worker to $100.30. The maximum rate, now $378 per employee, will jump to $459 – with a steadily increasing number of Florida businesses expected to fall into this sector because more have been laying-off workers.

The tax increase is automatic under state law, triggered when the balance of the state’s unemployment compensation trust fund dropped below 4 percent of taxable payroll last June. The trust fund had a $1.3 billion surplus last December – but as Florida’s jobless rate skyrocketed, the fund fell into deficit for the first time in history.

The state since has been borrowing roughly $300 million a month to pay unemployment claims since the trust fund fell into the red in August.

The loans already will saddle future state Legislatures, with a $129.6 million debt to the federal government in 2011 and another $199.4 million the next year on what has been borrowed so far, according to state Senate analysts.

But the tax impact on businesses was heightened when the Tallahassee-based associations urged lawmakers to expand increasing taxable wages from $7,000 to $8,500 per employee to help replenish the trust fund more quickly. The move also was designed to push back Democratic-backed efforts to draw down more federal stimulus money by extending unemployment benefits to currently disqualified Floridians.

“That’s still a non-starter with us,” Miller said.

Still, prospects of digging the state into a deeper financial hole doesn’t make sound business sense, lawmakers say. Republican lawmakers, usually compliant to the pleas of business groups, say they are working to try to find a solution – but erasing the tax increase outright isn’t a likely solution.

Florida’s 11.2 percent unemployment rate is a full percentage-point higher than it was when the Legislature approved expanding the taxable-wage base in May at the urging of business groups.

“We have to look at both the short- and long-term implications of what we do,” said House Republican Leader Adam Hasner, R-Delray Beach. “We want to help businesses, but we’re cautious about what would happen if we just rewind last spring’s decisions.”