FUTA Surtax Expires

July 1, 2011 | Roger McEowen


We now have insight into how long a "temporary" tax lasts according to legislators in Washington, D.C. It's 35 years! Effective July 1, 2011, the FUTA surtax of 0.2% has expired. That means the FUTA tax will be 6.0% rather than 6.2%. The surtax has never been a permanent part of the law, and its original purpose was to reimburse the Federal Treasury for unemployment benefits that were paid from 1973-1975. But, over time, the surtax has collected about $73 billion. That's far more than the amount that was needed to repay the Treasury. Over the years, the surtax has been extended eight times. It is estimated that the expiration of the tax will reduce federal unemployment taxes by $1.4 billion annually. That amounts to about $14 dollars per employee every year. While that won't go too far in offsetting higher state unemployment taxes that have risen dramatically in recent years, it is a bit of relief for employers in the depressed economy. Because there aren't any federal benefits that are directly linked to the surtax, its expiration will have no impact on current or future unemployment benefits or recipients.

The President's 2012 budget proposal sought to make the surtax permanent.