Mike Fights Against Tax Increase

Jan 19, 2010

Unemployment Tax Slams Florida Businesses

by Patrick Peterson

The primary effect of Florida’s surging unemployment has unfolded visibly across the state, with stalled construction, a tepid housing market and declines in consumer spending.

A secondary impact is being felt now. It’s not as obvious, but you might hear the howls as business owners open their tax bills.


Because strong demand caused the state to race through its unemployment compensation fund — and then through hundreds of millions of dollars more in federal funds — rate increases have been triggered to help replenish the fund. That means many business owners will have to pay thousands of dollars more in unemployment tax.



The tax could force businesses to delay improving their businesses or making new hires, they say, slowing economic recovery.



“By taxing businesses, it is just going to cause things to be worse,” Melbourne businessman Tom Cobb said.



Cobb owns a Melbourne restaurant, Makoto Japanese Steakhouse, and a factory that makes Makoto-brand salad dressing. He employs about 65 workers between the two operations and has not laid off any of them. Nevertheless, he will be required to pay $12,000 to $15,000 more this year in unemployment taxes, in addition to his normal tax costs.



At the restaurant, which employs 55, the unemployment tax has gone up 278 percent. And at his factory that employs 10, the tax has gone up to 39 times of what it was.



“I’m getting taxed percentage-wise as much as someone who may have laid off half of their staff,” he said.



Containing $1.3 billion a year ago, the state’s unemployment trust fund was empty by August. A $600 million federal injection followed. If the fund dips below 4 percent of taxable payroll for a fiscal year, rate increases kick in automatically.



So a base rate that was 0.12 percent last year on the first $7,000 of wages rose to 1.18 percent on the first $8,500 of wages this year, a double whammy for business owners. For a company that carried out layoffs, the rate could go as high as 5.4 percent.



“The rates are calculated by statute and we send out the notices to let everybody know what to expect,” Robert Babin, legislative and cabinet services director for the Department of Revenue, said. “To change them would take legislative action.”



State Sen. Mike Haridopolos, R-Melbourne, hopes to convince the legislature to put off the tax until the economy is stronger.



“Given the unemployment rate in Brevard (11.9 percent) and the potential unemployment with the shuttle program ending, we believe it’s something we should put off in the short term and not have these unemployment compensation taxes go up when employers can least afford it,” said the incoming state Senate president. “When the economy’s really strong, you run a surplus.”



When the legislative session begins in March, Haridopolos hopes to coral the votes to delay collection of the tax.



“The way it will truly be absorbed is job creation,” he said. “According to the federal rules, unfortunately, you’ve got to raise the rate. You’re actually going to run the risk of getting more people unemployed.”



The tax could actually slow the area’s economic recovery.



“It makes it harder for me to hire new employees or to give my employees any type of increase,” said Pam Munch, who with her husband, Jim, owns Janitorial Depot of America in Melbourne. The nine-employee store sells janitorial supplies. The tax increase will cost her company thousands. Additionally, expenses and insurance premiums are going up.



“For a small business any increase is something we have to adjust to somewhere else,” she said. “You try not to increase your client price, because right now they are shopping for the best prices.”

Reprinted from the Florida Today

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