A few observations:
- One element of tax policy (tax system design) is who pays the tax - directly and indirectly. The FUTA is imposed on employers, but most likely really paid by employees in the form of lower wages and partly by customers in higher prices.
- Unemployment covers employees. Should there also be a safety net for self-employed individuals who either lose their entire business or see a reduction during an economic downturn? Why not have all workers and service recipients (employers) pay some portion of compensation into a fund that workers could draw upon for emergency living expenses or retraining?
- There are some compliance and tax gap issues with unemployment taxes. One problem is referred to as SUTA dumping where a business might set up a new business in order to get a lower unemployment tax rate. For more on that, see information on the California EDD page - here.
What do you think? Should the employer payments be increased? Are there better approaches to helping unemployed and underemployed employees and self-employed individuals?