Missouri is among 13 states where employers will pay increased FUTA taxes in January 2014 as a result of continuing Title XII UI debts, according to a report released by the U.S. Department of Labor and the Treasury. The increase will take Missouri’s unemployment insurance surcharge from $42 per employee to $63 per employee.

“This surcharge is over and above unemployment insurance rates employers pay. It has been called a ‘catch up tax’ because it is designed to force states to pay off outstanding federal UI debt,” said Dan Mehan, Missouri Chamber president and CEO.

Missouri began borrowing funds from the federal government in 2008 to pay unemployment insurance benefits that the state trust fund was unable to cover. After two consecutive years of outstanding debt, the states’ employers lose FUTA tax credits, essentially raising the tax they are assessed for unemployment insurance. This surcharge increases with each year until the debt is repaid.

Following the economic downturn, many states borrowed money from the federal government. The list of indebted states is decreased from 2012 because a number of states have taken steps to reduce or eliminate outstanding debt. Unfortunately for Missouri employers, our state remains on the indebted list.

Efforts to reduce Missouri’s unemployment insurance burden by limiting fraud in the system was strongly supported by Missouri’s General Assembly in 2013 and was passed in Senate Bill 611, but was vetoed by Gov. Jay Nixon. The Missouri House of Representatives was two votes short of overturning that veto during the 2013 Veto Session.

“Now Missouri employers will pay the price of Gov. Nixon’s inaction,” said Mehan. “Rather than tighten up the system to root out individuals who can claim unemployment benefits after being fired for stealing from their employers and doing drugs on the job, Missouri has chosen to allow employers to pay higher taxes.”

Missouri currently owes $308 million to the federal government for federal unemployment insurance debt.