Bill Aims to Reduce Unemployment Comp Taxes
Lawmakers are considering a proposal that, similar in spirit to one advancing in Massachusetts, would reduce Connecticut employers’ unemployment compensation taxes.
HB 5314, which received the bipartisan support of the Labor Committee, would use an estimated $60 million in projected budget surplus funds to help pay down a portion of the interest on the debt to the federal government for monies borrowed by the state to shore up the Unemployment Compensation Trust Fund.
Connecticut borrowed nearly a billion dollars during the recession to keep the unemployment system afloat; and for each year that debt remains, federal unemployment taxes (FUTA) on businesses are increasing by $21 per employee.
A business’ total unemployment compensation payment is composed of three parts: the experience rate, the state tax, and the FUTA. In a normal year, the FUTA is $42 per employee. Last year, because Connecticut’s debt has been outstanding for four years, employers paid $105 per employee.
Since borrowing the money, businesses have also been required to pay a special assessment of $15 per employee in order to pay down more of the debt. The increases in FUTA and the special assessments will continue until the debt is repaid – which may not happen until 2016 at the current repayment rate.
HB 5314 could help change this dynamic. If Connecticut used some of the state’s projected budget surplus to help pay down the interest on this debt on behalf of businesses, it could help minimize these yearly tax increases and special assessments. And it would allow businesses to focus on investing more in their businesses and hiring more employees.
For more information, contact CBIA’s Eric Gjede at 860.244.1931 | email@example.com | @egjede
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