Proposed FUTA Wage Base Increase Due to Increased State Employment Tax Rates

NewsBy the year 2014, State Unemployment Tax Rates may double due to an increase in the FUTA (Federal Unemployment Tax Act), which will hurt employers financially if the proposal goes through. The FUTA taxable wage base right now is $7,000, but it may more than double to $15,000 in just a couple of years according to the Unemployment Services Trust (UST).

Many states currently have depleted their unemployment funds due to the recent recession and higher number of those unemployed. In fact, many have deficits that continue to increase. Experts agree that the United States unemployment tax system needs some restructuring to lessen the burden on employers.

The FUTA tax rate may also decrease by half from 0.80% to 0.38%. Currently, the FUTA tax is at $56 per employee per year but that may increase to $57 per employee per year if the proposal goes through. Though this may seem to be a small increase, it will have a sizable effect on the states, as they have to match or exceed the FUTA $15,000 wage base or they will have to face higher FUTA rates.

Nonprofits will not be affected, as 501(c)(3) organizations are allowed to opt out of the state unemployment tax system with the sole responsibility to reimburse the state dollar-for-dollar for each worker’s unemployment claim. Other organizations in the U.S. pay $2.00 for every $1.00 paid out in benefits.

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Rachel Lorinda
Rachel, writer for Recruiter.com, has graduate level work in literature and currently works in university administration.