NFIB supports eliminating the Federal Unemployment Tax "surtax," lowering the FUTA tax and returning the unemployment insurance system to the states.
- Our current unemployment insurance system was created in 1935 as a federal/state partnership. The states, for the most part, provide benefits, and the federal government finances the administration of the program.
- What this dual system means to small businesses is that they have to pay unemployment taxes both to the federal and to the state government.
- This is an inefficient system that imposes its tax burden on employers and helps make payroll taxes the highest of all taxes that small businesses pay.
NFIB supports the following changes:
- Eliminate the now unnecessary FUTA surtax. The temporary FUTA surtax was established in 1976 to repay loans from the federal unemployment trust fund. Even though this money was fully repaid in 1987, Congress has extended this temporary tax five times, imposing an annual $1.4 billion tax burden on America's workers and employers. The FUTA surtax is no longer needed and should be eliminated.
- Cut permanent FUTA taxes to reflect the lower costs of the program. Even with the elimination of the surtax, FUTA collects far more than it needs. FUTA raised $6.1 billion last year, but only $3.5 billion was spent on FUTA-related expenses. The rest was used to pay for non-related government programs. The FUTA taxes are higher than they need to be to cover expenses and should be cut.
- Return the unemployment insurance system to the states. The current federal/state system is duplicative and inefficient, costing the federal government, state governments and private employers hundreds of millions in unnecessary administrative costs annually. The administration of the unemployment insurance system should be returned to the states to eliminate these unnecessary costs.
