End of jobless tax from 1976 is a lift for big employers

WASHINGTON - Virtually every private employer in the country will get a tax cut on Friday.

It won't affect workers' paychecks. But the expiration of a 35-year-old "temporary" unemployment tax - about $14 a year per worker - will mean real money for some big companies as President Obama pushes Congress to raise taxes on businesses by closing some loopholes.

Amid a fierce debate over whether higher taxes should be part of a deal to reduce annual federal budget deficits - in exchange for letting the government go further into debt - the small cut in federal unemployment taxes has received little attention on Capitol Hill. Most employers probably don't even know they are getting it, especially those being hit with bigger increases in state jobless taxes.

But business groups say every little bit helps, whether for a small employer struggling to make a payroll or a huge company like Wal-Mart Stores, with more than 1.4 million U.S. workers. That change will save Wal-Mart nearly $20 million a year.

Some worry that reducing federal unemployment taxes while the jobless rate hovers above 9 percent will add to the jobless-benefit system's financial problems. But the tax cut will save businesses nationwide more than $14 billion over the next decade, according to congressional estimates.

"The death of any tax on jobs, no matter how big or small, is a historic moment and one to be celebrated," said Rep. Dave Camp (R., Mich.), chairman of the tax-writing House Ways and Means Committee. "The fact that it has taken 35 years for this 'temporary' tax to expire clearly illustrates the dangers of higher taxes. Once in place, they are unlikely to ever go away."

The levy was a 0.2 percent surtax on the first $7,000 of a worker's wages.

Getting rid of it lowers the federal unemployment tax to 0.6 percent from 0.8 percent for most employers. That's a decrease from $56 a worker to $42. The tax is paid by nearly all private employers, who also must pay state unemployment taxes.

The surtax was imposed in 1976 to help pay for federal unemployment benefits distributed in the 1970s.