South Carolina businesses could see an additional $55 million in tax savings after the federal government decided not to extend employer surcharges under the Federal Unemployment Tax Act, or FUTA.
On July 1, the FUTA tax rate will decrease to 0.6 percent—down from 0.8 percent—on the first $7,000 of each employee’s wages. Although the FUTA tax rate was actually 6.2 percent on the first $7,000 of each employee’s wages, if businesses paid their state unemployment taxes (SUTA) on time they received a 5.4 percent credit giving them a net tax rate of 0.8 percent. The net rate will now drop to 0.6 percent.
Last year the government raised the rate to 1.1 percent in order to pay back a nearly billion dollar debt the state owed when high unemployment and mismanagement bankrupted its employment agency. The feds lowered the rate after South Carolina set aside an additional $146 million this year to begin paying that back.
Combine those 0.3 percentage points with the 0.2 percent surcharge, and businesses will pay only 0.6 in FUTA taxes next fiscal year, roughly half what they faced in 2010.
South Carolina Department of Employment and Workforce director John Finan said that is good news for businesses.
As a result of the federal government dropping the surcharge in addition to recent legislation passed regarding State Unemployment Insurance Tax rates, our state’s businesses will see significant savings in what they pay in taxes at both the federal and state levels
Sen. Greg Ryberg (R-Aiken) chairs the Senate’s Labor, Commerce, and Industry Committee. He says businesses will benefit all along the state’s tier system.
The bad news was, when we had a FUTA loss, everybody was hurt. The good news is, with a FUTA gain, everybody is helped.
South Carolina is one of several states that had to receive the loans last year, but it is now the first to begin to paying them back.