FUTA Surtax
RSS Issue FeedBACKGROUND
The Federal Unemployment Tax Act, or FUTA, imposes a 6% payroll tax on the first $7,000 of income paid by employers to each of their employees annually. FUTA came into existence in 1939 to guarantee financing for a national employment security system. The idea was for employers to pay the costs of administering the unemployment compensation and national job placement system. In return, employers would receive assistance in recruiting new workers and the unemployed would be able to find jobs more quickly.
Before July 1, 2011, the federal payroll tax had included a "temporary" surtax of 0.2 percent that was added in 1976, and had been extended several times before it expired on July 1, 2011.
The Administration included a provision in its FY2013 budget proposal to reinstate the surtax and make it permanent, which would amount to a permanent tax increase on employers.
The FY 2013 budget proposal also would increase the wage base subject to FUTA from $7,000 to $15,000, index the wage base to wage growth and reduce the rate to 5.78%.
U.S. CHAMBER POSITION
The Chamber opposes the reinstatement of the 0.2 percent FUTA surtax. Businesses are already managing through the weak economy, enhanced regulation and fiscal uncertainty. The FUTA surtax has outlived its usefulness.
The Chamber sees increasing the wage base as a means of generating additional FUTA revenue from employers, which raises concerns about the impact this proposal, if enacted, would have on employers’ ability to create jobs.
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