FUTA is part of the overall witholding package, stuff that the Employer and the Employee pays whether they like it or not, as some % of wages. Yes, FIT witheld is what most dudes think of as “with-holding” but FICA is A with-holding tax also- as opposed to Self-employment tax which is paid directly.
They are not the same, FICA, FUTA and FIT (not to mention Medicare and others ) are all part of the overall package that is “witheld”. They are also called “payroll taxes”.
Got it?
And like I said- Employees do not pay FUTA directly, they pay it* indirectly.* Just like if an employer provides medical benefits for his employees, that money is coming from the same budget as wages, thus medical benefits aren’t “free” either- they reduce the wages paid to the employee.
Some employers do fight UI claims- those who have had a history of lots of claims thus their rates are/have going/gone up. Generally of course, employers that have a history of getting rid of a *lot *of employees without cause have other problems too. A few claims do not effect your rates. Fighting a *valid *claim is just being an asshole. Some employers *are *assholes.
A buddy of mine had this problem recently. He was down $7,000 in one month. He marked a coin, gave it to a trusted customer, and at the end of the day poured out a container she had been seen messing with. There was the coin, together with a lot of other money, and the customer independently confirmed that he’d seen the employee put the money into the container. Firing, cops, etc. etc.
Earlier you said “The Employer pays not a single dime to the employee for Unemployment- it all comes out of payroll taxes. Which in general- the employee pays indirectly.”
I would like a cite for that. I want you to show me that Unemployment Tax does not cost me, an employer, anything. I want you to show me that when my UI rate goes up, it costs the employee something and not me. This is what you keep saying over and over, but I haven’t seen a cite for it yet. In fact the only cite you gave me said that it was an employer paid tax.
I’m starting to get the feeling that what you are doing is coming around to this conclusion from a backwards round about way. I guess you must approach payroll differenty then I do. Let’s just say your UI rate went down and due to that the business had an extra $10,000 per year. I think what you are saying is that you would give that $10,000 back to the employees in raises/bonuses. Is that how you are approaching this? If that’s the case, and your rate goes back up (due to too many claims), do you decrese your employee’s wages or get rid of an employee or not give out bonuses? Now that wouldn’t be fair, that would be hurting the employees for something their co-workers did.
Even if that is the case, saying “The Employer pays not a single dime to the employee for Unemployment- it all comes out of payroll taxes. Which in general- the employee pays indirectly.” is still wrong.
I assume your also going to say that I don’t match Social Security or Medicare? That my portion is paid by the employee as well. Hell, while we’re at it, if I didn’t have to pay my vendors back, I could give everyone a raise as well, so does that mean, indirectly my employees are actually paying all my accounts payable as well? This could go on forever.
This employee pays ‘indirectly’ is a dumb and confusing way to explain how FUTA/SUTA works. It is paid for by the employer, out of the employers pocket, if the rate goes up, the employer has less money to take home at the end of the year, if it goes down, he has more, plain and simple.
Not only that, but if you told an employee that they are responsible for their own FUTA/SUTA indirectly and they called the state and asked about that (as I would if I had employer tell me that) you’d be getting a call from the state asking you to explain yourself.
Okay, you mentioned healthcare insurance. That only reduces an employee’s check by the amount you hold the employee responsible. At my place, the employee pays for half of their insurance, the owner pays the other half. In the end, that other half of the insurance will reduce the owners take at the end of the year. The way you say it, it sounds like, you would be charging the employees ‘indirectly’ for the other half, wheather they like it or not. What about the people that opt not to take it? Are they paying, indirectly, for the other employees to have insurance?
Oh, one more thing I should mention, I don’t know how it worked for you, but in my case, if my UI rate goes up, the employees get paid the same thing, when our insurance premiums go up, the employees get paid the same amount (less their portion of the premium). We don’t take money away from the employees to cover those things, we find ways to get more money coming in the front door to pay it, it would be unfair to not give an employee a raise becuase my UI rates went up.
To back up this point with an anecdote;
I’m a union employee. If my bosses UI insurance rates increase he can’t touch our wages. I don’t pay an extra penny.
On whether employers or employees pay unemployment insurance costs. There is an interesting topic covered in most intro/intermediate microeconomics courses explaining that the legal incidence of a tax is irrelevant to the economic incidence of the tax. I’ll try to do it justice, but if I don’t, I encourage those debating it to check into it.
The most common example is Social Security, which in terms of legal or accounting type distribution is paid 50/50. However, in the long run the result would be the same if it were paid 100% by either party. If it were paid fully by the employer, wages would go down as more employees would be willing to work for lower wages without having to pay their share of the tax. If it were paid 100% by the employee, wages would need to increase to keep employees in the labor market. Who bears the burden of a tax in fact depends on the elasticity of the labor market, rather than who the politicians require to write the check to the government. [detail: the structure of *other * taxes can give legal incidence some effect.]
Ya know, I just wrote a big lenghtly comment (twice now), but I realized everything I wrote, I already said. What it seems to come down to is this.
As far as I am concerned, the employer pays FUTA/SUTA
As far as you are concerned, the employee pays FUTA/SUTA