Unemployment Tax Decision
After a session-long push by some of the state's largest business groups, the Florida Legislature on Thursday agreed to scale a back a massive tax increase due this year from nearly 460,000 businesses.
The bill now headed to the desk of Gov. Rick Scott is expected to save businesses $550 million over the next two years.
"This tax reduction will have a direct impact on Florida jobs, allowing businesses to avoid a major cost increase and maintain payrolls," said Rick McAllister, president of the Florida Retail Federation.
The tax hike is not eliminated, but instead it's not as big as once anticipated.
The change means that the minimum tax rate this year would jump from $72.10 per employee to $121.
The initial hike would have increased the tax to nearly $172 per employee.
The legislation would also cap the maximum amount per employee at $432 instead of $459.
Businesses pay unemployment taxes that are used to provide benefits to those who are out of work.
But the problem is that the trust fund used to pay those benefits has been drained due to the state's high unemployment rate.
The rate is now 9.9 percent.
Since 2009, the state has been forced to borrow $2.4 billion from the federal government to keep the trust fund solvent.
The state - which manages the trust fund outside of the regular state budget - has paid part of the money back.
But now it's paying interest on the unpaid balance, which is passed on to employers through a once-a-year assessment.
State legislators initially voted to increase the taxes in order to replenish the fund, but have delayed the tax hikes in hopes the economy would recover.
A coalition of business groups, including the Florida Chamber of Commerce and the Florida Retail Federation, pleaded with Scott and lawmakers last December to block the $817 million increase planned for this year.
But legislators were reluctant to go along with another delay because blocking the tax hike would stretch out the time Florida has to pay back the federal government and subject employers to higher costs over a longer period of time.
Scott himself did not ask lawmakers to scale back the increase when he outlined his priorities for this year's session.
In the end GOP legislators worked out a compromise to scale back the size of the increase.
But some lawmakers on Thursday asked why they were choosing to delay the full brunt of the tax hike yet again.
And Rep. Franklin Sands, D-Weston, chided Republicans by pointing out that they would be slowing down the amount of time the state is taking to pay back the federal government.
GOP legislators have sharply criticized the federal government the last few years for borrowing too much money.
"You can't expect to borrow money and not pay it back," Sands said.
"What about all that self-reliance you guys keep talking about?"
But Republican lawmakers asserted that it was worth paying extra interest over the next few years in order to avoid the entire tax hike planned for this year.
"It is a small price to pay for the enormous tax relief," said Rep. Mike Horner, R-Kissimmee.
"It is a tradeoff. Businesses will pay slightly more later. I think it's the right thing to do."
Florida employers pay the annual tax based on each business' employment history over the past three years.
Businesses with no layoffs - nearly half of the total - pay the minimum rate while those with the worst records pay the maximum.
The rest pay somewhere in between.
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