American businesses shell out billions of dollars a year to the Federal Unemployment Trust Fund, which is supposed to channel the money back to the states to aid unemployed workers. Instead, much of it is used to help balance the federal budget -- which was not the purpose of the program when it was established during the Great Depression.

• Employers, but not employees, pay a rate of 0.8 percent on the first $7,000 of each employeeís earnings into the fund -- which now has a $23 billion balance.

• But that balance is nothing more than federal IOUs in the form of U.S. Treasury bonds.

• The federal government sends less than 60 percent of the money it collects to the states -- keeping the rest in Washington.

• Revenues from the tax are estimated at $6 billion this year.

The 0.8 percent tax rate is actually composed of two rates -- an original 0.6 percent levy, plus another 0.2 percent "temporary" surtax added in 1976.

Failing to receive help from Washington, state unemployment agencies are reportedly stretched so thin that they do little more than process unemployment checks -- rather than helping the unemployed find jobs, as the program was intended to do. The lack of funding from the federal government forced states last year to impose another $208 million in unemployment insurance taxes on employers and workers -- forcing them, in effect, to pay twice for the same service.

Ten percent to 15 percent of unemployment insurance claims -- as much as $3 billion of the $20 billion -- are paid in error, according to the Labor Department, because systems for verifying payment are inadequate.

Source: Robert H. Gettlin, "A 'Temporary' Tax that Won't Die," Investor's Business Daily, October 20, 1998.