ECN Forum Forums General Topics of the Trade Business Related Discussion Unemployment tax limit

I read that FUTA is 6.2% of wages on the first $7,000.00.
Is that to say that my maximum obligation per employee would be $434.00?
This will be new to me, but it seems low.

Thanks.

All states have a companion unemployment tax. The Feds give a credit for the state taxes paid so that the Federal exaction is reduced even further.

The Federal honey pot backs up participating state programs ( that's 50 out of 50 states )such that if one state runs out it receives funds to cover from this account.

Virtually all states use a base rate adjusted by 'experience' and or industrial classification.

Pennsylvania is the only state that I know of that needed to tap the Federal program, and that was decades ago. ( circa 1975 IIRC )

Thanks, Tesla!

So, in addition to the federal rate of 6.2% on the first $7,000.00, are you're saying that the State will continue to take their rate (whatever it may be) for the entire pay year?

Do you know what the rate is in your state?

The Federal credit effectively drops their net take all the way down to 0.8%, not 6.2%.

Its limit is so low because Congress has never revisited it in scores of years. In the beginning $7,000 was real money.

The 6.2% language was crafted to compel each state to adopt its own program without triggering a Supreme Court case in the FDR era. That's because the feds were clearly legislating labor practices long the exclusive domain of the states.

As a side note, the unemployment tax and benefit was adopted promptly after it worked for NAZI Germany. A connection that is rarely mentioned today. In fact the system went world wide in the 1930s.

State rates run all the way from 2% to 8% depending on who, when and where. The rules are set and reset by the state legislatures -- particularly the caps and payouts -- practically every year.