The report Receipt of Unemployment Insurance by Higher-Income Unemployed Workers (“Millionaires”) by Donald Hirasuna from Congressional Research Service provides information relevant to proposals that would restrict the payment of unemployment benefits to individuals with high incomes. (Adapted excerpts by Job Market Monitor)
Summary
The economic recession that began in December 2007 officially ended in June 2009 when the U.S. economy reached a trough, or low-point, in business activity. This recession lasted 18 months, making it the longest of any recession since World War II. To date, there is some growth in the nation’s Gross Domestic Product (GDP), and unemployment rates have fallen—but they remain persistently high in comparison to previous years. Peaking at 10.0% in October of 2010, the unemployment rate was 8.2% in May of 2012, up from 4.6% in May of 2006.
In response to the sustained period of high unemployment rates, Congress has extended Unemployment Insurance (UI) benefits several times. As a result of the Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96, signed into law on February 22, 2012), UI benefits are potentially available for up to 99 weeks, which is longer than during any previous recession—although in practice, no state currently offers more than 79 weeks of benefits.
The temporary, long-term extension of UI benefits has occurred at a time when the federal government and the states face serious budget constraints. The recent debate in Congress over the latest extension took place in a climate of ongoing concern over the level of federal budget deficits. It was in this context that a proposal to restrict unemployment benefit receipt based on income emerged. Specifically, the House-passed version of H.R. 3630 (the Middle Class Tax Relief and Job Creation Act) included a provision that would impose an income tax on unemployment benefits for high-income individuals. Based on a scaled approach, the tax would increase to 100% for a single tax filer with Adjusted Gross Income (AGI) of $1 million (or AGI of $2 million for a married couple filing a joint return). The provision, however, was not included in the final version of the legislation that became P.L. 112-96.
Distribution of Household Income and Unemployment Benefits
Table 1 shows the number of tax filers that received unemployment benefit income by categories of AGI for tax years 2008 and 2009. Among tax filers with AGI of $1 million or more, 2,840 reported receipt of unemployment benefit income in 2008 and 2,362 tax filers reported receipt of unemployment benefit income in 2009. This represents 0.02% to 0.03% of all tax filers that reported receiving unemployment benefit income.
Table 2 shows the amount of unemployment benefit income received by tax filers by AGI category for tax years 2008 and 2009, where incomes are not adjusted for inflation. As shown in the table, the amount of unemployment benefit income received by tax filers with AGI of $1 million or more is relatively small. For tax year 2008, tax filers with at least $1 million in AGI reported receiving $18.6 million in unemployment benefit income, which represents 0.04% of total reported unemployment benefit income. Similarly, for tax year 2009, tax filers with at least $1 million in AGI reported receiving $20.8 million in unemployment benefit income, which represents 0.02% of total reported unemployment benefit income. Lowering the proposed income threshold would restrict more households from receiving unemployment benefits.
Table 1 and Table 2 provide estimates of how many households might be affected and how much less in unemployment benefits might be distributed if the income threshold for restricting benefits were changed to lower income levels. For example, if the restriction were placed at households with AGI of $500,000 or more, approximately 8,011 more households might have been restricted from receiving unemployment benefits and $52.8 million less in unemployment benefits might have been distributed in 2009.
Source:
@ Receipt of Unemployment Insurance by Higher-Income Unemployed Workers (“Millionaires”)
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