WHAT IS THE TEMPORARY FUTA SURTAX?
The third-largest tax increase included in the Taxpayer Relief Act of 1997 was the extension of the temporary FUTA surtax, which was scheduled to expire at the end of 1998. Established in 1976 to help restore the depleted federal Unemployment Insurance (UI) trust funds, the surtax was first set to expire in 1987. Since 1987, however, it has been extended five times despite having accomplished its goal in 1988. It is now set to expire on December 31, 2007. 4 The revenue from the FUTA tax is designated for the administration of the UI system. The current FUTA tax rate of 0.8 percent on the first $7,000 of wages has two components: a permanent tax rate of 0.6 percent and a temporary surtax of 0.2 percent. Although this payroll tax generated an average of $7.1 billion in revenue per year between FY 1995 and FY 2000, Congress appropriated an average of only $3.6 billion per year for administration of the UI system. 5 The remaining annual surpluses have helped to balloon federal UI trust fun
