State considers business tax cut
Federal relief money may be used to replenish unemployment fund
After a year when millions of Floridians lost their jobs to the coronavirus pandemic, the state’s Republican legislative leaders want to use millions of dollars in federal COVID-19 relief money to cut unemployment taxes for businesses.
Under state law, businesses’ unemployment taxes automatically increased on Jan. 1 to replenish the state fund used to pay unemployment benefits to laid-off Floridians. Over 2.3 million Floridians displaced by the pandemic filed claims last year, shrinking the fund from more than $4 billion to less than $800 million.
But instead of taxing businesses to rebuild the fund, Senate President Wilton Simpson and Gov. Ron DeSantis suggested using a portion of the $16 billion Florida is set to receive from President Biden’s $1.9 trillion stimulus package.
“If we do get stimulus money, we obviously want to avert any type of tax increase because of the unemployment fund. So we’ve got to replenish that,” DeSantis said Tuesday during a briefing with reporters.
Simpson, of Pasco County, said during a speech to fellow lawmakers Tuesday that one of his foremost priorities this year will be funneling a portion of that Congressional aid — as much as $2 billion — into the unemployment trust fund in order to give “a very large tax cut for businesses that are trying to reopen in the state.”
The new unemployment tax rate varies
by employer, depending on how many workers they’ve laid off in the past, prior to the pandemic. For those at the minimum rate, they’ll owe $20.30 per ex-employee, up from $7. For those at the maximum rate, they’ll continue paying $378 per ex-employee. Layoffs caused by the pandemic are not used in calculating a specific company’s rate.
The state’s Revenue Estimating Conference projected that the increase would result in businesses paying an additional $713 million to the trust fund this year. Last year, the tax raised a total of $451 million.
So a $2 billion influx would build up the fund enough to avoid any increase and perhaps cut the rate even more.
Democratic Rep. Angie Nixon, who owns an ice cream shop in Jacksonville, said she empathized with small-business owners who have struggled during the pandemic. But this proposed tax cut, she said, is “just another way for the government to provide subsidies and benefits to corporate donors and friends.”
“Corporations should be paying taxes into the unemployment system to provide residents much-needed assistance during this time. Federal money should be spent on the priorities and needs of the people, like saving health care, like saving education, like saving affordable housing,” Nixon said. “Not corporate welfare. And let’s be clear, this is what this is all about: corporate welfare.”
Worker advocates object Other worker advocates also were vehemently against the proposal, arguing that federal relief money should not be used to finance a business tax break. They warned that letting businesses off the hook for unemployment taxes could jeopardize future unemployment benefits for laidoff workers.
Hundreds of thousands of Floridians are still out of work, and economists have predicted that the state’s tourism industry won’t fully recover until 2023. In total, the Department of Economic Opportunity has received over 6.4 million applications for assistance since March — 1 million more than the state received during the previous eight years combined.
“Using one-time federal funds for long-term recurring expenses is not a good idea. The federal relief should be used for pandemic-related, one-time, non-recurring expenditures,” said Esteban L. Santis, an analyst with the Florida Policy Institute focused on tax and revenue issues.
He said although another pandemic isn’t likely to occur anytime soon “in Florida, we are susceptible to natural disasters and other environmental risks that could further strain our reemployment system in the future.”
A coalition of business industry groups, including the Florida Chamber of Commerce, Florida Restaurant & Lodging Association, National Federation of Independent Business and Florida Retail Federation, penned a letter this week to Simpson, DeSantis and House Speaker Chris Sprowls asking them to lower the tax.
“The trust fund needs to be replenished. It’s a question of should it be replenished by the business community or some other means?” Carolyn Johnson, policy director for the chamber, told the Orlando Sentinel. “At the end of the day, this (the pandemic) was intended to be a non-chargeable event. Businesses didn’t ask to shut their doors. And yet businesses are the ones who are bearing the brunt of this increase.”
The chamber’s biggest donors include Walt Disney World, Publix Supermarkets and U.S. Sugar Corp., among others.
But even with the increase, Florida businesses will continue paying some of the lowest unemployment taxes in the country. Right now, they pay on average $50 per employee, well below the national average of $277.
In fact, FPI has recommended that the state raise businesses’ unemployment taxes.
’That’s a failure’
At a meeting between the director of Florida’s jobless agency and senators, proponents of lowering the tax applauded that Florida had been able to keep its unemployment fund in the black, despite a record number of layoffs that at one point skyrocketed unemployment to 13.8%. They credited DeSantis’ decision to open businesses and ease restrictions to curtail the spread of the virus.
However, Rich Templin, director of politics and public policy for the Florida AFL-CIO, a statewide federation of labor unions, argued the trust fund still has money left because the state pays such low jobless benefits and they’re largely inaccessible.
According to the most recent data from the federal Department of Labor, only 11% of unemployed Floridians are receiving unemployment insurance and about half of those who qualify exhaust their benefits before they’re able to find a job. The most someone can collect is $275 per week.
“There’s been a lot made about how our trust fund is not broke, how we didn’t have to put money in it from the federal government. That’s not a success. That’s a failure,” Templin told senators. “There is no reason in a catastrophic economic collapse like we just experienced, there shouldn’t be a dime in that trust fund. It should be in the red.”
Strict eligibility requirements locked out many self-employed, part-time and gig workers, such as Uber drivers and adjunct university professors, who had to rely on federal programs to get benefits. According to the DEO, 80% of jobless benefits that were paid to Floridians came from the federal government: $18 million.
Those meager state benefits were put in place in 2011, under Gov. Rick Scott, in order to lower businesses’ unemployment taxes after the Great Recession drained the trust fund.
“A decade ago, this Legislature set up a system to not work, to stay solvent at the expense of the people who have a right to these dollars, and to benefit the businesses who have a responsibility to keep it solvent,” said Ida Eskamani, a lobbyist for Florida Rising, a progressive group representing workers and low-income residents.