Wisconsin’s Unemployment Insurance (UI) Trust Fund will start 2015 with a positive balance, which means there will be a reduction in federal unemployment taxes (FUTA) for employers. FUTA taxes are designed to discourage a negative UI fund balance.
Because unemployment benefits are an entitlement program and must be paid even if the state trust fund is insolvent, states must then either raise the money themselves or borrow from the federal government’s share of UI tax revenues.
The FUTA tax rate is 6.0% for the first $7,000 of an employee’s taxable wages. However, the federal government gives a 5.4% tax credit to companies in states with positive UI fund balances, making .6% the effective federal tax rate. Wisconsin’s positive balance in the UI trust fund allows employers to enjoy the 0.6% rate for the first time since 2009.
The federal unemployment insurance program was enacted in 1935 at the time of the Great Depression, as part of the Social Security Act.