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Democrats Want Feds to Ease Unemployment Tax Hike

Business groups pressing lawmakers to block a sharp increase in the state’s unemployment compensation tax may get help from House Democrats.

While the business organizations have been chiefly targeting industry-friendly Republicans in the Legislature, Rep. Ron Saunders, D-Key West, said Tuesday that the House Democratic caucus is willing to spearhead a proposal to the Obama administration that could erase the tax hike.

“One of the few advantages I see these days of having Democrats in charge in Washington is that maybe we can be the ones who can help lead the charge to get our businesses a break,” Saunders said.

“If (Congress) is going to be looking at another stimulus, there can be no better stimulus than keeping our small businesses going,” he added.

Organizations leading the charge, the Florida Retail Federation, National Federation of Independent Business, and the Florida Chamber of Commerce, effectively want lawmakers to rollback the tax hike – and borrow more from the federal government to replenish the collapsed trust fund that pays Florida’s 1 million unemployed.

“This could be a big help to us if Democrats get on board,” said Randy Miller, executive vice-president of the Florida Retail Federation.

House and Senate Republicans conceded that rescinding the tax increase outright isn’t a likely solution. But Senate budget chairman J.D. Alexander, R-Lake Wales, told the News Service of Florida on Tuesday that appealing to the White House is a possible approach.

“From our perspective, any help is welcome,” Alexander said. “If they think they can get the folks in Congress or the White House to help out, I’d be for that.”

Florida is not alone in struggling to maintain an unemployment compensation fund. Twenty-six states and the Virgin Islands have borrowed $24.2 billion from the federal government – much of it over the past year – as unemployment rolls climbed.

Florida’s 11.5 percent unemployment rate – its highest in 36 years – has forced the state to borrow $839.5 million since August, when the trust fund fell into the red.

The Florida Legislature will have to begin repaying the loans, with hundreds of millions of dollars in interest, alone, beginning next year.

Since many states are in the same predicament, Saunders and other proponents said the Obama administration could offer at least another year’s grace on the loan repayments – or forgive the handout completely – in what would amount to a second stimulus plan for states.

“It’s not good to increase taxes on business,” Alexander said. “But given our resources, it’s hard to erase. It’s a big number.”

Tax notices were sent to businesses last month, drawing the focus of many lawmakers who have begun hearing from hometown companies.    

The minimum annual rate charged by the state to employers with a strong record of keeping employees will rise from $8.40 per worker to $100.30. The maximum rate, now $378 per employee, will jump to $459 – with a steadily increasing number of Florida businesses expected to fall into this sector because more have been laying-off workers.
Tax payments are due this spring – and critics of the increase say it could lead many firms to lay-off more workers or at least go slow on hiring in the fragile economy.

The tax increase is automatic under state law, triggered when the balance of the state’s unemployment compensation trust fund dropped below 4 percent of taxable payroll last June. The trust fund had a $1.3 billion surplus last December that melted away as Florida’s jobless rate skyrocketed.

The tax impact on businesses expanded when the same business groups now clamoring for repeal of the tax hike supported increasing taxable wages from $7,000 to $8,500 per employee to help replenish the trust fund more quickly.

The move also was designed to push-back Democratic efforts to draw down more federal stimulus money by extending unemployment benefits to currently disqualified Floridians.

“Setting aside that, because it’s a contentious issue, we think that Democrats and Republicans agree we should approach the federal government to see about avoiding this big increase,” Saunders said. “This may be one of the few issues (where) the Republicans deem our help necessary. And we want to be involved in that.”

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