Wednesday, February 09, 2011

Businesses looking at a higher base to pay unemployment taxes on--I think

The Obama administration has proposed new rules that will subject employers to paying state unemployment taxes on the first $16,000 of earnings per employee per year. The standard amount per employee per state at present is $7,000, although an increasing number of states have gone to a higher base in the last few years to deal with high claims for unemployment insurance as well as state budget deficits. The plan does defer certain interest on state borrowings from the Federal Government on unemployment benefits until 2014 and an increase in the Federal unemployment tax rate until the end of next year.

Do not be surprised to see not only an adjustment in salary subject to unemployment taxes but a proposal to increase the maximum amount of salary subject to the old age (6.2%) portion of FICA. Conventional political wisdom is that expanding the tax base tends to be less controversial than increasing the tax rate.


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