Florida lawmakers likely to reduce size of tax increase for businesses

March 2, 2012 (From the Sun-Sentinel) Florida businesses may get a last-minute break on their taxes.
With a little less than two weeks left in the session, the Republican-controlled Legislature is moving ahead with a plan that would scale back a massive tax increase due this year from nearly 460,000 businesses.

It wouldn’t eliminate the tax hike entirely, but it would likely make it smaller than anticipated.

Senate panel this week approved a measure (SB 1416) that would spread the tax hike over several years and make other changes designed to bring down the size of the increase.

The change means that the minimum tax rate this year would jump from $72.10 per employee to $121. The initial hike would have increased the tax to nearly $172 per employee. The legislation would also cap the maximum amount per employee at $432 instead of $459.

“It’s a relief to the small business community so they are not going to be hit too badly,” said Sen. Ellyn Bogdanoff, R-Fort Lauderdale, and sponsor of the legislation.
Businesses pay unemployment taxes that are used to provide benefits to those who are out of work. But the problem is that the trust fund used to pay those benefits has been drained due to the state’s high unemployment rate. The rate is now 9.9 percent.

Since 2009, the state has been forced to borrow $2.4 billion from the federal government to keep the trust fund solvent. The state — which manages the trust fund outside of the regular state budget — has paid part of the money back. But now it’s paying interest on the unpaid balance, which is passed on to employers through a once-a-year assessment.

State legislators initially voted to increase the taxes in order to replenish the fund, but have delayed the tax hikes in hopes the economy would recover.
A coalition of business groups, including the Florida Chamber of Commerce and the Florida Retail Federation, pleaded with Gov. Rick Scott and lawmakers last December to block the $817 million increase planned for this year.

But legislators were reluctant to go along with another delay because blocking the tax hike would stretch out the time Florida has to pay back the federal government and subject employers to higher costs over a longer period of time.

After weeks of negotiations top Republicans and business groups instead have reached a compromise to lessen the size of the planned tax increase.
“It’s still hundreds of millions of dollars in savings,” said Dave Hart, executive vice president for the Chamber.

Florida employers pay the annual tax based on each business’ employment history over the past three years. Businesses with no layoffs — nearly half of the total — pay the minimum rate while those with the worst records pay the maximum. The rest pay somewhere in between.

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