ISSUE: What steps can be taken to ameliorate the impact of impending unemployment compensation tax increases on Florida’s employers.

DISCUSSION: Florida’s Unemployment Compensation Tax System continues to be an area of crucial concern for Florida’s employers. Without intervention by the Legislature, employers paying at the minimum rate will have a tax rate of $171.70 starting January 1, 2012. This is an increase of $99.60 per employee. Employers will also have to pay an additional special assessment of around $10.00 per employee in order to make a payment on the interest due to the federal government.

Two significant changes need to be made to Florida’s Unemployment Compensation Tax Policy in order to ensure Florida’s employers don’t suffer further negative consequences as a result of the expected tax increase.

First, we need to stretch out fund balance recoupment over a longer period of time. Fund balance recoupment is designed to provide a cushion to Florida’s Unemployment Compensation Trust Fund. There is no federal requirement to maintain such a cushion and, in dire times such as these, this is just extra money that’s being pulled from the pockets of employers. Currently, Florida Statutes require $2 billion dollars be recouped from employers over a three-year period. Stretching out fund balance recoupment over a longer period of time will not impact benefits. It will simply reduce the tax burden on employers and allow them to have more money available to create jobs.

Second, we need to maintain the taxable wage base at $7,000. A minimum taxable wage base of $7,000 complies with federal policies. Like stretching out fund balance recoupment, maintaining the minimum wage base at this level will reduce the tax burden on employers and encourage job creation. And, it will not impact the ability of claimants to receive benefits.

We cannot change the amount we owe the federal government, but we can make smart choices about the impact on Florida’s employers.

POSITION: The Florida Retail Federation supports the review and adoption of key taxation policies that will minimize the negative impact on Florida employers and help get Floridians back to work.

RELATED BILLS

HB 1061 (Horner)

SB 1416 (Bogdanoff)

UPDATES:

1/13/12
The issue of Unemployment Compensation Taxes was the subject of much discussion this week. On Wednesday, The House Business & Consumer Affairs Subcommittee held a workshop to discuss the proposal being advanced by the Florida Business Community which would ameliorate the impact of the current statutory requirements related to the Unemployment Compensation Program, which increases the wage base to $8,500 and triggers the Unemployment Compensation Trust Fund reserve balance recoupment to begin on January 1, 2012. Back on December 6, 2011 the Florida Retail Federation, along with seven other business organizations , including the Florida Chamber and Associated Industries of Florida, all signed on to a letter to Governor Rick Scott and both Legislative Leaders encouraging them to not allow the largest tax increase in the history of the Unemployment Tax to occur. The proposal is very straight forward and does not adversely impact any current unemployed claimants. The business community simply has requested that the $7,000 wage base remain in effect and the recoupment period be extended from a three year repayment period to a six year repayment period, with the six years to begin on January 1, 2013. By adopting these changes, the new minimum rate for 2012 would drop from $171.70 down to $75.60 per employee for employers paying at the minimum rate. This is a tax savings of $96.10 per employee, resulting in $447.2 million in savings to Florida Employers during 2012.

1/27/12
On Thursday afternoon, the Senate Commerce and Tourism Committee took up SB 1416 by Senator Ellen Bogdanoff relating to unemployment compensation. The bill, which rebrands the state’s unemployment compensation program as the reemployment assistance program, was met with opposition by state business groups due to an amendment filed by Senator Nancy Detert which allows employee leasing companies, or PEO’s, to make a one-time election to report and pay contributions under the tax identification number and contribution rate for each of their clients. Business groups argued that allowing an employee leasing company to elect to shift a claim back to the employer, whose rates may differ from their rates, would in turn shift rates across the board, creating a need for an across-the-board rate adjustment which all businesses would be responsible for paying. Senator Bogdanoff expressed some concerns about the amendment and its potential to weigh down the bill, but agreed to accept it. Despite business groups’ voiced concerns, the amendment passed and SB 1416 reported favorably from the committee with a vote of 6 to 0.