[Congressional Record (Bound Edition), Volume 154 (2008), Part 2]
[Extensions of Remarks]
[Page 1803]
[From the U.S. Government Publishing Office, www.gpo.gov]




               INTRODUCTION OF ``FUTA SURTAX REPEAL ACT''

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                           HON. WALLY HERGER

                             of california

                    in the house of representatives

                       Thursday, February 7, 2008

  Mr. HERGER. Madam Speaker, employers across our country contribute a 
portion of their payroll on a per employee basis to pay for the 
potential future unemployment benefits of their workers. In a very real 
sense, this payment--required by law--represents a trade-off for 
workers, where the tax is paid at the expense of workers today, who 
would otherwise currently be receiving higher wages or more 
opportunities for work. If paid to workers directly, they could spend 
or save it as they wished. Still, our government has decided that this 
tax is an important investment that must be made on behalf of an 
employee in case the business falls on hard times and resorts to 
layoffs.
  It works like this: Under the provisions of the Federal Unemployment 
Tax Act (FUTA), employers pay an extra 0.6 percent on the first $7,000 
of payroll per employee in Federal unemployment taxes. Depending on the 
size of a company and the number of workers on payroll, these extra 
taxes can add up and affect decisions to invest in new equipment, hire 
workers, retain employees or even pay more in wages. Back in the 1970s, 
Congress faced an unusual shortfall in the trust funds that hold 
unemployment taxes, so it decided to levy an additional 0.2 percent 
surtax on employers, known as the FUTA surtax. Again, as employers paid 
more in non-wage benefits, the wages of employees suffered by this same 
amount. This meant that the previous payroll tax contribution for 
Federal unemployment was raised from 0.6 percent to 0.8 percent. While 
0.2 percent may not seem like a significant imposition, over the decade 
this 25 percent increase in the overall unemployment tax restored a 
sound financial footing to the trust funds.
  But the surtax didn't go away. Since it was no longer needed, after 
the 1980s, the FUTA surtax has been repeatedly extended--most recently 
in December 2007--and used as an extra source of tax revenue for 
Congress to spend on other unrelated programs. In other words, as the 
House and Senate expand Federal programs, the American wage payer is 
literally picking up the tab in a form that conveniently doesn't show 
up as an increased income tax burden. Today, the Federal unemployment 
insurance trust funds have about $35 billion more than they need, 
making the additional $1.5 billion per year brought in through the FUTA 
surtax totally unnecessary. Even without the surtax, the standard 
unemployment tax on employers brings in more than enough money to 
support the current Federal responsibilities, without even tapping the 
$35 billion in the trust funds. In fact, the outstanding balances in 
the Federal accounts are about six to seven times the annual cost of 
the unemployment program, leaving plenty of room for a ``rainy day'' 
reserve.
  My legislation would repeal the FUTA surtax for once and for all. As 
our Nation's economy and workers face uncertain times, rolling back the 
FUTA surtax would provide new flexibility to employers at just the 
right time--enabling a stronger and more prosperous workforce.

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