According to news accounts, the Obama Administration’s Fiscal Year 2012 Budget will propose several changes to the Federal/State Unemployment Insurance (UI) program.  Chief among them will be increasing the taxable wage base from $7,000 to $15,000 in 2014.  Ways and Means Committee Chairman Dave Camp (R-MI) and Human Resources Subcommittee Chairman Geoff Davis (R-KY) issued the following statements reacting to the White House’s plan.

Camp: “We need to reform our unemployment programs, but any plan that relies on more than doubling the tax base and then continuing to raise payroll taxes in perpetuity isn’t going anywhere in the House.  Employers are demanding reforms to the unemployment program, not higher taxes on job creation.”

Davis: “The Administration’s unemployment proposal claims the worthwhile goal of preventing near-term tax hikes.  But it does so by forcing even greater and permanent tax hikes on employers after 2012.  For a President who entered office calling for ‘A New Era of Responsibility,’ punting this problem to the next Administration is hardly responsible.  If we want to provide short-term tax relief, we should instead look to cut record spending to cover the costs, instead of making future tax hikes even bigger.” 

Impact on State taxes: States must have a State tax wage base at least equal to the Federal wage base.  By increasing the Federal wage base to $15,000, all States below $15,000 would then have to raise their State UI tax wage base to that same level.  Making the tax increase even worse is the Administration’s plan to index for inflation this $15,000 base level.  As a result of this ever increasing taxable wage base, future State tax hikes would be pushed higher and higher on an annual basis and have an even bigger impact in the 34 States (including the District of Columbia and Puerto Rico) that have UI tax wage bases of less than $15,000 today.  Those include: 

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