Instead, they want to pay more for the employees' salaries and wage protection. The business cost rising from the payment of tax towards unemployment compensation will have to recoup by the business firm through its business and actually the consumers bear the tax burden of the firm. The tax rate of unemployment insurance is based on the stability in working of the firms. A company with stable employment history will get deduction in tax rate. An employer is held liable for paying towards unemployment insurance in case he has quarterly payroll of $1500 or more in a calendar year.
"The tax rate for new employers is .0270 (2.7 percent). The first $7,000 in wages paid to each employee during a calendar year is taxable. Any amount over $7,000 for the year is excess wages and is not subject to tax. Excess wages can never be greater than gross wages."1
According to the Federal Unemployment Tax Act establishment and administration of the Unemployment Compensation Program is carried on mutually by the state and federal governments. Thus there exist dual system of state and federal in the tax program and the, payments of the employer towards payroll taxes is levied by both the state and federal governments. The rate of payment towards unemployment taxes by employees is on the basis of established tax rates and the history of employers work stability. Thus employers having a history of greater unemployed workers would have to pay more towards the unemployment compensation tax. In case the business owner is compelled to lay off his business for military service, the resulted unemployment to workers would lead to count as a higher unemployment rate in the firm and thus the tax rate payable by the employer will be higher. Similarly if the employees took leave from their jobs for military service then also firms work history will be shown as higher unemployment rate and thus also the tax rate will be increased.
In case workers who refrain from job for joining with their transferred military spouse have the legal right to receive unemployment compensation. Thus the employer wants to pay for their non working employees even though job is exist there. In some states the employers are not chargeable for the workers' leave for military service and thus it does not taken for calculating its tax rate. However the workers have the right to receive unemployment compensation and this is charged from the unemployment compensation fund of the state. Thus the actual cost of workers compensation is paid by the employer as a socialized cost and this will lead to increase the overall state unemployment tax rate. 2
Complicated tax regulations is causing firms to indulge in unnecessary law suits with high cost and this will always prevent establishing new business. Along with this higher rate of workers compensation and unemployment insurance has lead to increasing the labor cost of firms. In Florida there employ tort reform for reducing the burden of employers. Joint and several liability rate reductions are followed in workers unemployment compensation insurance.
Small businesses are seriously affected by the workers compensation insurance. Majority of the burden of the rising tax rate is always comes to small businesses. Due to shortfalls in state regulation relating to compensation insurance the small business are required to bear a major portion of the UC fund. The working cost such as regulatory costs and tax payments are always becoming