Prohibit Companies From Dodging Unemployment Tax -- Kelly Services Declares Support of House Bill 3463
11 Marzo 2004 - 5:26PM
PR Newswire (US)
Prohibit Companies From Dodging Unemployment Tax -- Kelly Services
Declares Support of House Bill 3463 TROY, Mich., March 11
/PRNewswire-FirstCall/ -- Kelly Services, Inc., a global provider
of staffing services, today announced its support of Housebill 3463
-- the SUTA Dumping Prevention Act. The legislation, which enjoys
bipartisan sponsorship, would ban the use of tax schemes by
companies to avoid unemployment compensation taxes. (Logo:
http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO) "Our
nation's unemployment insurance system, which provides a safety net
for jobless Americans while also benefiting employers and the
economy as a whole, is under silent siege," said Carl Camden,
president of Kelly Services. "This corporate tax dodge forces
society to pay the tab in the form of depleted state coffers,
government borrowing and increased taxes. Federal legislation is
needed to end this practice in a uniform fashion that sustains a
level playing field across the country," he said. SUTA stands for
State Unemployment Tax Acts. The urgency of the SUTA dumping
problem was highlighted in a U.S. House subcommittee hearing last
summer and with the November 2003 introduction of HR 3463.
President Bush has included passage of the bill among his
administration's budget priorities. Longstanding pledge America's
unemployment insurance system was created under the Social Security
Act of 1935. States then enacted their own unemployment
compensation programs within guidelines established by federal law.
These state programs provide temporary financial assistance to
eligible workers who are unemployed through no fault of their own.
In most states, benefit funding is based solely on a tax imposed on
employers. By law, employers bear a responsibility to pay
unemployment taxes at rates determined by the number of claims made
by their former employees. Employers with high unemployment
activity -- and thus a higher "experience rating" -- are assigned
higher unemployment tax rates. Employers with lower activity and a
lower experience rating pay less. "This is about as close as you
can come to a fair user tax, and the subversion of it puts those
companies who aspire to higher ethical standards at a
disadvantage," said Camden. Shell game A growing number of
companies -- encouraged by their accounting, law or consulting
firms, according to Congressional testimony -- are engaged in
tactics designed to disguise their true claims experience. This
practice -- SUTA dumping -- involves companies creating related
shell organizations populated with few employees at first to make
it "legitimate." Via the new entity, the company is able to
manipulate its unemployment claims experience to obtain very low or
even zero SUTA rates. The company later transfers a large
population of workers into the shell firm to significantly reduce
its tax obligations. Other tactics include the use of mergers,
acquisitions and reorganizations as loopholes to dodge a company's
fair share of unemployment taxes. "These schemes undermine the
integrity of the state unemployment insurance system, harming both
workers and employers who play by the rules," said Camden. The harm
Workers are harmed because this questionable practice depletes
state trust funds and eliminates the incentive for companies to
keep employees working, because the companies can escape the
financial harm that otherwise comes with laying off workers.
Employers are harmed because they must pay more to make up for the
taxes that othercompanies avoid through SUTA dumping. The tax-
avoidance scheme is most pervasive in businesses where payroll
taxes are a large portion of the company's total tax burden, such
as staffing, hospitality and construction. In last summer's U.S.
House subcommittee hearing, the Department of Labor said SUTA
dumping could be costing states billions of dollars in lost
unemployment funds. It is clear that increased unemployment over
the last two years has negatively impacted the solvency of
unemployment trust funds in most states. In fact, California
announced that it will raise unemployment taxes a record 51 percent
this year, and the state anticipates the need to borrow $1.3
billion to meet its obligations. When states borrow, employers have
to pay interest on these loans. "Employer SUTA rates are rising in
order to replenish unemployment trust funds depleted by the
recession. Now is the time when the temptation and payoff of SUTA
dumping is greatest, making it even more important for
legislatorsto act quickly to end this practice," said Camden.
Remedy House bill 3463, the SUTA Dumping Prevention Act, would
require states to revise their unemployment laws to require the
mandatory transfer of unemployment experience for mergers,
acquisitions and transfers of trade or business, regardless of the
reason for the transaction. In addition, the Department of Labor is
directed to develop tools and provide funding to train state
agencies to detect the practice. In some states, laws already exist
to prevent such practices; these laws should be enforced. "If state
and federal governments fail to address this critical issue, they
will be sending the message to employers that SUTA dumping is
acceptable, even expected," said Camden. "Doing nothingthreatens
the competitiveness of companies that refuse to engage in SUTA
dumping schemes. In fact, inaction is a slap in the face of those
companies who adhere to higher standards of ethics. The recent
lessons of corporate misconduct must not be forgotten so soon."
About Kelly Services Kelly Services, Inc.
(NASDAQ:KELYANASDAQ:KELYB) is a Fortune 500 company headquartered
in Troy, Mich., offering staffing solutions that include temporary
services, staff leasing, outsourcing, vendor on-site and full-time
placement. Kelly serves 200,000 customers through more than 2,500
company owned and operated offices in 26 countries. Kelly provides
employment for nearly 700,000 employees annually, with skills
including office services, accounting, engineering, information
technology, law, science, marketing, light industrial, education,
health care and home care. Revenue in 2003 was $4.3 billion. Visit
http://www.kellyservices.com/ .
http://www.newscom.com/cgi-bin/prnh/19991208/KELLYLOGO DATASOURCE:
Kelly Services, Inc. CONTACT: Bob Doetsch of Kelly Services, Inc.,
+1-248-244-5362 Web site: http://www.kellyservices.com/
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