tazzygirl
Posts: 37833
Joined: 10/12/2007
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Tsk tsk.
Try this instead...
The basic UI system is funded by taxes that employers pay on behalf of their employees. (In a few states, the employee pays part of the tax.) States collect most of these taxes — including the taxes that pay for basic UI benefits — but the federal government collects some of the taxes as well. Temporary emergency federal programs like EUC are funded out of general Treasury funds.
While technically, employers pay both the federal and state taxes, economists generally regard the tax as falling on workers on the theory that the dollars employers pay in tax would otherwise have gone into workers’ paychecks.
The federal tax is set by the Federal Unemployment Tax Act (FUTA) and is equal to 0.8 percent of the first $7,000 paid annually to each employee. [7] This tax is regressive; since most workers earn more than $7,000 per year, most workers are effectively paying the same flat tax of $56 per year regardless of income. FUTA taxes thus represent a much smaller share of the wages of high-wage workers than low-wage workers.
The revenues raised by the federal tax (and the general revenue to support temporary programs like EUC) flow into the federal Unemployment Trust Fund. The fund is maintained in four accounts, each of which has a specific purpose: (1) financing the administrative costs to the states of providing unemployment benefits and offering job location and information services; (2) paying the federal share of the Extended Benefits program; (3) making loans to state unemployment programs that run short of funds; and (4) providing benefits to former federal employees. In addition, Congress can draw on the trust fund to pay for additional temporary federal benefits during recessions.
When federal trust fund balances reach a certain high level, additional transfers are automatically made to the states. These “Reed Act” transfers (named after the 1954 legislation establishing this policy) go directly into state unemployment trust funds. States can use this money only for unemployment insurance but are not required to use it to improve or expand their UI benefits.
States too generate funding for unemployment insurance through a tax on employers. The amount of earnings subject to the tax varies, but in most states, it is less than $10,000. Due to the caps on taxable earnings, the state unemployment insurance tax is, like the federal tax, regressive.
The tax rate applied to these earnings varies not only by state but also by industry; employers in industries with high worker turnover (and therefore a greater likelihood that their employees will apply for unemployment benefits at some point) are generally taxed at a higher rate. In 2008, the average rate applied to taxable earnings was 2.5 percent, but because of the cap on earnings subject to the tax, tax collections were just 0.7 percent of total earnings. These revenues flow into state unemployment trust funds and are used to pay the actual benefits that workers receive under the regular state program, as well as the state share of benefits under the Extended Benefits program.
The huge increase in the number of UI recipients because of the recent recession has put enormous pressure on the UI financing system. States have had to borrow nearly $40 billion so far from the federal Unemployment Trust Fund to fund their unemployment programs. Since unemployment is expected to remain high for some time, such borrowing will likely continue for the next few years.
States are required to fully repay the loans, with interest, within two to three years of borrowing the funds. The Recovery Act waived the interest payments through December 31, 2010, but after this date, interest will begin to accrue. If a state does not repay the full amount, the federal government will recoup its funds by effectively raising the federal tax on employers within the state.[8]
http://www.cbpp.org/cms/index.cfm?fa=view&id=1466
And, before you start with the libera ideology, you may want to read more...
During recessions and while unemployment remains high during recoveries, the federal government has historically created temporary, wholly federally funded programs providing further weeks of benefits. Congress created the most recent such program, Emergency Unemployment Compensation (EUC), in June 2008. Workers who exhaust their regular state UI benefits before they can find a job can receive up to 34 weeks of EUC benefits regardless of their state’s unemployment rate; workers in states with high unemployment rates can receive up to 53 weeks of EUC benefits, as well as EB benefits if their state’s unemployment insurance laws allow it. Some states also may offer additional benefits under separate state-funded programs.
Oh, and, yeah they sure are getting rich off this since they collect only 47% of their former paychecks and they have to declare it as income to the IRS.
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