Tax day is coming up. As I write this it looms like a specter only ten weeks away. What makes this coming April 15th different than most? Two words: Unemployment Insurance.
This year many millions of workers lost their jobs because of the COVID-19 pandemic. Fortunately, many individuals who normally would not have been able to receive unemployment compensation were able to this time, and for a relatively brief period of time those benefits were expanded by an additional $600 per week.
But I’m sure I’m not alone in doing what I did when it came time to submit my unemployment claim. Facing the loss of a home, the loss of medical insurance, food uncertainty, etc., I’m sure many unemployment compensation recipients chose to not have income tax withheld from their payments. I’m sure many people hoped, if perhaps naively, that their layoff would be brief and they’d be back earning a regular living long before the year was over. And that when the time came they’d be able to meet their tax obligations.
And now these people are facing huge tax bills come April 15th. And then there are the people who did choose to have their weekly assistance reduced by having taxes withheld. And guess what? Those people are hurting too. Because so far the assistance provided by the federal government over nearly a year’s time amounts to all of $2,600, or about fifty bucks a week, along with sixteen weeks of enhanced unemployment compensation.
A tax holiday on 2020’s unemployment compensation would be of huge help to our nation’s unemployed. And the infrastructure is already in place. There’s barely a measurable administrative cost to the IRS forgiving the tax due on unemployment compensation to those who didn’t have taxes withheld from their UI, and in issuing refunds to those who did.
Yes, obviously there is a cost to this. And that is the loss of revenue that would otherwise be received. And undoubtedly there would be grumbling from the usual suspects that “people who chose to continue to work” wouldn’t receive the same largesse, as though I and tens of millions of other Americans chose to see our employers close up shop. You can count on it.
But a tax holiday on last year’s unemployment compensation would be a quick, relatively easy, and very effective way of helping those people who lost work because of the pandemic. And it’s the kind of stimulus….a tax break….that Republicans like, although they’d much rather see it go to those who need it the least, such as their corporate masters and hedge fund owners. And although I don’t fully understand all the criteria for passing things via reconciliation, I think that a tax holiday could be passed in such a manner should the GoOPers choose to be their usual obstructionist selves.