Florida businesses in all industries have sustained a few significant blows in this economy. The commercial and resident housing markets have been hard hit by lending freezes and plummeting property values, while large and small companies have been forced to layoff and halt hiring.
Today, Florida’s unemployment rate sits at 11.5%, and that’s after reaching a 34 year high of 11.2% in October 2009.
As Florida businesses fight to remain viable they are expecting another substantial blow as the unemployment tax rate has increased, and may result in additional job cuts.
Why is the Unemployment Tax Rate Increasing?
Many Florida businesses are baffled by the recent rate increase and are left wondering why a state, riddled by a high unemployment rate, would impose a substantial tax hike that will likely result in more job losses.
The rate increase can be attributed to recent depletion of Florida’s Unemployment Trust Fund. The fund is set to increase automatically when the state’s unemployment rate reaches a certain level. And, when the rate exceeded 11% in October, the tax increase was triggered in hopes of replenishing the trust fund.
What will the Tax Increase Cost Florida Businesses?
The rate increase, which went into effect on January 1, may be felt by some business owners as early as April 2010, when a portion of their taxes will be due. Under the new tax rate, employers can expect to be taxed on the first $8500 of their employees’ earnings, an increase from $7000 last year.
According to David Daniel of the Florida Chamber of Commerce, the rate change will cost employers an additional $1.2 billion in 2010.
Various factors play a role in determining the exact percentage a business will be taxed, including the amount of unemployment claims filed against the employer by former employees, as well as the number of years the company has been in business.
Opponents of the tax increase are asking elected officials to freeze the tax hike for now, and reconsider it at a time when the economy makes it more feasible for business owners.
“The Florida Chamber is asking the Legislature to set the taxable wage back to $7,000 and to suspend the trigger to increase the unemployment tax rate — and is asking it to act quickly.”
To date, Florida Department of Revenue is moving forward with the tax increase, and can expect to collect substantially more tax revenue from businesses in 2010.
Are you a Florida business owner concerned about how the tax increase will affect your business? Do you plan to adjust your business for the increase?
