Working In These Times
1.2M Jobless Face Unemployment Extension Deadline—and Regressive Tax on Benefits
U.S. Rep. Elijah Cummings (D-MD) (R) speaks during a hearing on the latest unemployment figures before the Joint Economic Committee February 5 in Washington, DC. Despite the drop in unemployment, 20,000 jobs were still lost in January. (Photo by Alex Wong/Getty Images)
With polls about the election of GOP Sen. Scott Brown in Massachusetts showing that much of the public sees Obama as trying too hard to aid Wall Street rather than working families, it is absolutely imperative that Obama go on the offensive to establish that he is willing to fight for working people.
Otherwise, the Obama line about "bailing out Wall Street in order to save Main Street" will become a set of concrete overshoes for many Democrats come November. The public wants the economic crises of their families—particularly unemployment—addressed immediately.
The latest economic headlines—about a drop in unemployment from 10% to 9.7%, and signs of increased economic activity—actually conceal the underlying reality. While the official unemployment rate dropped, 20,000 jobs were lost in January. The statistical drop in joblessness was produced by many hundreds of thousands ceasing their search for work, thus producing the misleading headlines. Fully one out of six manufacturing workers remain jobless.
NO REAL COMFORT IN JOBLESS RATE DROP
AsThe New York Times explained:
The overall toll of the recession, meanwhile, grew larger: 8.4 million jobs have been lost since December 2007, the government said, nearly one million more than previously recorded. Those numbers jumped significantly from December because the Labor Department on Friday said it had completed a benchmark revision of job losses since April 2008.
Job losses in August, September and October of last year were 240,000 worse than original forecasts.
The current situation underscores the importance of shfiting more federal funds to the states to refill their unempoyment compensation coeers. With such massive unemployment persisting, unemployment funds at the state level are in very serious shape, as ProPublica reports.
The unemployment insurance system is in crisis due to a combination skyrocketing unemployment and – in some cases – poor planning.
A record 20 million Americans collected unemployment benefits last year, and twenty-six states have run out of funds and been forced to borrow from the federal government, raise taxes, or cut benefits.
Six states are considering reductions in benefits and rule changes adverse to workers,
FEB. 28 DEADLINE LOOMS
The National Educational Law Project warns that the situation will get much worse unless Congress acts by Feb. 28, when some 1.2 million Americans are in danger of running out of benefits:
Unless the Congress extends provisions of the stimulus bill by the end of February, 1.2 illion laid off workers will become ineligible for extended benefits in March. "Congress must swiftly act to maintain the lifeline for millions of jobless Americans caught in the undertow of record long-term unemployment in this ongoing downturn," said NELP director Christine Owens in a statement.
"The stimulus bill added up to 53 weeks of federally-funded unemployment benefits to the 26 weeks provided by states -- and then up to an additional 20 weeks of extended benefits. Without another extension, a person receiving unemployment benefits will not be
able to advance to the next tier of federal benefits after February (nobody would lose benefits mid-tier).The stimulus bill also provided a $25 weekly boost to benefit checks and a 65 percent subsidy of COBRA health insurance.
The human toll from inaction will be immense:
The cost of not reauthorizing these important unemployment provisions will be substantial—in the form of increased foreclosures, less money flowing through communities, and reliance on other public benefits—and will slow down the economic recovery that will bring us jobs.
ROBBING PETER TO PAY PAUL: TAX ON UNEMPLOYMENT BENEFITS
While the most crucial immediate task to help the jobless is to force Congress to act before Feb. 28, the unemployment comp system needs another fix: repealing the federal income tax on UC (unemployment compensation) income.
Adding insult to injury for jobless workers is the persistence of an outrageous but barely-remembered change enacted in 1983 during the last recession. At the federal level, Reagan and the Republicans came up with an inventively regressive rob-Peter-to-pay-Paul scheme to deal with the shortfall in federal funds: taxing UC benefits to help provide support the UC system.
FIRMS GET TAX CUTS WHILE DESTROYING JOBS
The taxation of UC benefits was particularly galling because of the massive tax cuts that Reagan had bestowed upon corporations like General Electric in the name of job creation, while such firms were busy moving jobs off-shore en masse.
The tax on UC was also enormously counter-productive, because the newly-applied tax reduced the spending power of laid-off workers and delayed the end of the recession.
Incredibly, the federal income tax on UC benefits remains in effect in 2010 under a Democratic administration, still acting as a brake on the end of the recession and the creation of more jobs. (Clarification: the Obama stimulus proposal has modified the tax on UC to exempt the first $2,400 in UC payments. See below for more on this.)
Along with adopting the "big changes" that Richard Trumka has laid out to create jobs and extend unemployment benefits, one small change—finally dumping the tax on UC, a nasty legacy of Ronald Reagan's reign—would also be very much welcomed by the unemployed.
CLARIFICATION: While the tax on the jobless was instituted in 1983 during the last very severe recession by Ronald Reagan's regime, the Obama stimulus act, to its credit, created a partial exemption for a small share unemployment insurance, John Dipko of Wisconsin's Dept. of Workforce Development tells me.
"As part of the recovery act (ARRA), the first $2,400 of [unemployment] benefits during the 2009 tax year are exempt from federal taxation.," Dipko says. "The date extensions now under consideration in Congress [which need to be passed by Feb. 28] may or may not include the provision for tax year 2010."
Hopefully, in the name of justice, the exemption can be expanded to exclude all unemployment compensation from taxation.
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Comments
I have always felt the tax on unemployment benefits to be a mean spirited and blatant slap in the face to working Americans. It serves as a sad and powerful reminder of the anti worker policies forged by the Republicans and their revered hero, Ronald Reagan. Thanks for inluding it in your article. If I’m not mistaken, Reagan also instituted the tax on employer provided worker disability benefits.
To your point, there is no way organized labor should be willing to accept any excuses from Obama’s administration on why the tax is still in place. Labor provided a grass roots support structure for Obama primarily on his promise to turn back the anti worker greed of corporations. The hope that President Obama instilled is fading fast with the working class. It appears to me, that the Rebulicans have taken his desire to build consensus as a sign of weakness. They have exploited his efforts to transcend partisanship and made him appear impotent to effect change.
It is time for him to remove the gloves and come out swinging for the working class. He needs to wield the power our countrymen have entrusted him with. Wall street and their special interests are laughing in his face while the overwhelming majority of our working class continues to suffer.
I lost my job through no fault of my own when the economy went south. It’s a spit in the face to move up the ladder and then go from making $800 a week to $350 before taxes. My benefits recently ran out and I’ve still had no luck finding a job. I urge anyone like me to go to homecashcrop.com or some other money blog and find ways to make some supplement income. This is the only thing keeping me afloat. It’s not much, but it’s been a life saver.
When this country is able to support it’s citizens in the form of work being available then they can close the door on unemployment insurance but until the numbers show real progress over a realistic period of time it is the duty of everyone to support this needed compensation. I laugh at the monthly reports showing a .3% decrease in job loss, for January but that’s because most people are working in post holiday jobs that will reflect in March when they’re all unemployed again and it will rise back but even higher. I tried to get one but am over qualified for most that I’m now applying for. Starting your own business is a joke if no one spends money they can’t buy your services!!!!
The media has the way to make a difference. Instead of giving credit to murderers and rapists how about using their outlets for something good like making the country aware that Feb 28th over 2 MILLION people like me(I’m on my last FED tier extension) will have NOTHING LEFT and by June 18% of the population will make this economy something that we have never seen before. The country is on a road to the worst economic melt down we’ve ever seen. Here’s what happens when someone loses their unemployment in times like these,
This is what really happens when someone loses their UI benefits.
PAY ATTENTION::
No income-Can’t live no, where to go,
no way to look for work.
no mortgage payments-NO HOME.
no auto payments means No CAR!.
no electric payments-Back to the stone age!
no credtit card payments-who cares they should all go away.
no buying food- starving people!!! Get ready shelters.
no paying for daycare-kids suffer
no buying any luxeries like food, shelter. necessities like toilet paper!!!!
no buying anything- no economy!
AFTER ALL THAT, MORE PEOPLE LOSE THEIR JOBS AND NOW THEY HAVE TO LIVE LIKE US!!!!Sooner or later people run out!
Soon every credtor will have no income
then the banks will fail because they can’t pay the government back, serivces cease, more people fall under the radar then the country becomes a modern day joke in 2010 but kids won’t be obease, and the Saints will meet the President! oh yea!
Remember learning how to camp, fish and hunt when you were a kid? Didn’t think you would ever need those skills did you? Should’ve paid attention because tents will be the new modern architecture!!!!
I too am on unemployment and as of today 2/11 I have until this WED to find a job that I haven’t gotten yet or I’m moneyless. My last check will be $250.00 after that No income because congress isn’t willing to put everything else to the side and make unemployed people their ONLY PRIORITY!!! No days off, no holiday break no forgetting about us for the weekend we’ll still be here when you get back !!!
Most people can’t pay anything now to stay afloat and will soon be living in a shelter if they don’t extend UI for longer than 6 weeks or whatever band-aid timeframe they think is acceptable. Stop taxing UI benefits, extend to the end of 2010, create a real job plan, and do it now please!!!!!!!!!!!
If employers read this and are hiring I have 10 years of computer skillls in web design(html, Flash), repair, upgrading, and audio production, 25 years in auto center management, and I I’m 42yo male married, 2 kidsin Pa. willing to go to NJ(as long as i can keep my car). I went to Devry for 4 years and had to drop out with less than 6months to go to my Bachelors in CIS & Business Management due to job loss and no financing left to pay for school. Leave your contact info I’d love to send a resume’. Please do this before Feb 28 though because after that I’ll be living in my tent with no internet access, phone, or electric.
Dear friends:
First, thank you for sharing your heartbreaking stories and your very astute analysis of the situation..
I share your sense of outrage and desperation. Too bad that Lawrence Summers,. Timothy Geithner, and America’s CEOs have closed off their hearts to the situation of folks like you.
Not only do we still have most of the tax on UC benefits in place from the Reagan era (see below for clarification), but only 43% of the jobless get any unemployment benefits at all.
While editor of Racine Labor in the early 1980’s (unemployment in my hometown once hit 19.9% during the last bad recession. But that era almost seems like a picnic compared to this one.
However, even then, I interviewed families with children where the parents skipped eating the last couple days of the month in order to feed their kids, and used rags because they could not afford toilet paper. I have been unemployed myself for long stretches myself and know how that saps the life right out of you. My father’s family lost their home in the Great Depression, and I think that scarred him forever.
The outrageous tax on UC benefits was a reflection of our weakness in the labor movement during the 1980’s Reagan Recession.. For example, 30,000 jobless workers lined up for 100 jobs in zero0degree weather in early 1983 in Milwaukee, but labor never attempted to rally 30,000 people for public jobs and an end to profit-maximizing plant relocations. No wonder Reagan was able to get away with imposing the tax.
Since my post, I have learned that the Obama stimulus proposal has modified the tax on UC to exempt the first $2,400 in UC payments—-a small step in the right direction, but not the repeal that is needed.
Moreover, in my opinion, we need to do two crucial things:
1) Place heat directly on Obama by forming local groups of the jobless and demonstrating at corporations leaving your community at a time of national economic emergency.
2) Equally important, Obama is constrained by all the bought-off right-wing and centrist Democrats who are reluctant to push the creation of public-sector jobs and fight the flow of jobs leaving for Mexico and China.
Those Democrats need to be confronted at every public event by the jobless and perhaps faced with sit-ins by hundreds of the unemployed at their local congressional offices.
3) Use the Internet (there are progressive websites in most areas) and letters to the editor of your local daily (almost invariably pro-business, I know) to keep reminding the public of your situation, your outrage at Corporate America and their pet poodles in Congress, the futility of re-training when no jobs exist, and to demand congressional action to save our productive base.
Over 3/4 of Americans oppose jobs being shipped out of the US too low-wage dictatorships. Let’s get them on our side, and fully concentrated on forcing Congress to act—-which will awaken and embolden the overly-cautious Obama.
Why is the marginal Tea Party—with extreme right-wing views repugnant to most Americans and no policy proposals to get us out of this crisis—getting all the attention? We need to take it to the streets ourselves.
My e-mail is .(JavaScript must be enabled to view this email address), and I pledge tp l help to tell your stories and to fight for you. In solidarity, Roger
I despise the Tea Party for their disingenuous portrayal of who they are. They want all Americans to think they speak for the “everyman” when in fact, the majority of them are afraid their cushy lives will be negatively impacted by Obama’s added tax on the wealthy. If I had to guess, I would say many Tea Party protesters are placed by corporations to protest any pro worker agenda or pro poor agenda. Another reason for me to despise them besides pitiful Palin is the fact that we endured eight years of Bush’s anti working family policies without waging a real protest movement but the priveleged and money people have put together a protest movement, albeit a week one, the first year that they sense they will not be able to continue to leach off the working class.
Thank you Roger for your insight and desire to do the right thing for America. I couldn’t agree more with your statements about involvement and activism. The masses have been lulled to sleep by the puppet masters but I sense the time has never been better for the working class in this country to discard the old prejudices that divide us and come together to demand fairness and the opportunity to provide for our families. The pain and suffering experienced by our working class has gone much deeper than Wall Street, corporations or the pet poodles in Congress are willing to admit. Their ambivalence toward the suffering will cost us all through the continued march toward civil unrest.
In Solidarity,
Butch Easter (Justice22)
Unemployment Gone Mad - New Bill
STOP TAXING UNEMPLOYMENT BENEFITS! - To File Or Not To FILE?
Let’s not forget about those who have lost a job in 2009 and remember the US Congress (Ways and Means) can still help in 2010 with this new bill. Have you heard about the Jobless STUB Retro 2009 U/B Tax Free Act? STUB is like a paycheck stub and stands for STOP TAXING UNEMPLOYMENT BENEFITS. This bill is seeking critical AFL-CIO support and needs media coverage to garner passage. The new legislative reform bill will make all unemployment collected in 2009 tax free not just the current law deduction of an insane $2400 exemption ( about 6 checks). Many should consider waiting before filing to see if this bill passes because maybe most of their income is from unemployment compensation. Besides you have until April 15 2010 to make a decision. Especially if they did not withhold from their checks and they are long term (5.8 million are) then more than likely they have a IRS liability and will face collection. The launch site is called Unemployment Gone Mad and you can check for legislative updates. The bill is a big changer if you drew a lot of benefits. Remember a record 20 million collected some unemployment in 2009. This a big life changer for those millions who will face the IRS music. See Unemployment Gone Mad…..http://unemployment-gone-mad.com…... stay tuned
Dear friends:
Thanks for the response to my column!
So glad you wrote me!
I’m planning to do a column where I take excerpts from various e-mails I’ve received recently from unemployed workers. How would like to be identified—with your real name and hometown, or with a made-up name?
Thanks for your very powerful and deeply-felt letters. I will do my best to amplify your voice—millions of people are in your shoes, and you all deserve to be heard.
Please stay in touch. Best, Roger.