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/February 16, 2010

UWC - Strategic Services on Unemploymenty & Workers' Compensation
Business Coaltion Urges Senate To Enact Unemployment Payroll Tax Relief
WASHINGTON, D.C., February 16, 2010 - A coalition of national and state business organizations today urged the United States Senate to adopt legislation to reduce employer unemployment tax burden in response to skyrocketing state unemployment taxes.

In a letter to the Senate, coalition members asked that provisions be adopted to:

Extend the waiver of interest on loans to states to pay unemployment compensation through 2012-helping states in the short term to plan to restore solvency and to implement solvency legislation within a reasonable timeframe.
Waive Federal Unemployment Tax Act (FUTA) penalties on employers in states borrowing to pay unemployment compensation through 2011-without a waiver, FUTA taxes on employer payroll in approximately half of the states will be increased.
Reduce the Federal Unemployment Tax.
Provide $30 million in additional targeted administrative UI funding in FY 2010 and 2011 for state agencies to install automated systems and train personnel to better identify fraud and overpayments. This appropriation should be offset through enactment of a provision to add "New Hire" reporting as previously passed by the House of Representatives in HR 3458.
State unemployment tax rates paid by employers are projected to increase on average by 27.5% in 2010 with continued large increases projected for 2011 and 2012. State unemployment taxes are experience rated, and are increasing in response to the dramatic increases in unemployment claims in 2008 and 2009. Although state unemployment tax rates are set by state legislatures and Governors, federal law governs interest on loans to states to pay state unemployment compensation and federally imposed solvency taxes will add tax burden to employers on top of already skyrocketing state unemployment taxes.

In addition to losing the interest waiver after 2010, up to 25 states are scheduled to be subject to federal unemployment tax penalties if loans to pay unemployment compensation are not paid back by November 10, 2011.

"These job killing penalties couldn't come at a worse time. Now is the time we need to lower employment costs and encourage job growth - not put an additional drag on the economy" said Matt Harvill, Vice President for Unemployment Compensation at Kelly Services.

Congress should provide relief from interest and penalty taxes in the next two years to assure that efforts to increase job creation are not undercut by federally imposed tax burden. 28 states are currently borrowing to pay unemployment compensation and 40 states are projected to borrow by the end of 2010, just as the waiver of interest on these loans previously approved by Congress in the American Recovery and Reinvestment Act sunsets.

"This relief will not only reduce the cost of hiring new employees in the short term for all employers, but will reduce the uncertainty about unemployment tax burden for the next two years, encouraging employers to take the step to increase payrolls", said Douglas J. Holmes, President, UWC - Strategic Services on Unemployment & Workers' Compensation, a national association of business specializing in unemployment compensation.