Remove taxes on unemployment payments and add automatic stabilizers!
H.R. 1319 – The American Rescue Plan Act, is popular and full of great things for a country struggling with survival and rebuilding during this pandemic, but a couple of things would make it even better. (No, we’re not talking about the $15 minimum wage…that’s not happening in this bill, unfortunately.) It’s already passed the House, so we need to ask the Senate to amend it with some additional items.
Minimal script: I’m calling from [zip code] to ask Sen. [___] to add some important features to the H.R. 1319 – The American Rescue Plan Act to help struggling Americans.
- Zero out taxes for unemployment checks for this entire pandemic period. The IRS code excludes government payments made “in connection with a qualified disaster in order to promote the general welfare.” What is the point of a $1400 stimulus check if people just have to send it back to the IRS?
- Add automatic stabilizers to tie federal aid to economic conditions, so people don’t suffer waiting for new legislation to extend benefits if it becomes necessary.
- (For GOP senators only) Zero out Pay-Go. This bill is an emergency measure that I, along with the rest of your constituents are expecting you to work together with the Democrats to make happen.
Contacts – Call/EMail
- Senator Feinstein: email, DC (202) 224-3841, LA (310) 914-7300, SF (415) 393-0707, SD (619) 231-9712, Fresno (559) 485-7430
- and Senator Padilla: email, DC (202) 224-3553,
LA (310) 231-4494, SAC (916) 448-2787, Fresno (559) 497-5109,SF (415) 981-9369, SD (619) 239-3884(Updated local office contacts still in-progress.)
- Who is my representative/senator?: https://whoismyrepresentative.com
- ZERO OUT TAXES FOR UNEMPLOYMENT CHECKS:
- Yep, unemployment income is taxable, both federally and in many states. That means that the Americans who lost their jobs due to the pandemic were supposed to be saving money from their checks to give back in taxes, after trying to pay for basics, like housing, utilities, medical, transporation and food costs. Millions of unemployed workers are now facing surprise tax bills, ranging from several hundred to several thousand dollars. That $1400 stimulus payment they were counting on? Many will be giving it right back to the IRS, as fewer than 40 percent of the 40 million unemployed workers in 2020 had taxes withheld from their payments.
- The Century Foundation, a left-leaning think tank, believes that these pandemic-inspired unemployment benefits never should have been considered taxable to begin as the IRS code excludes government payments made “in connection with a qualified disaster in order to promote the general welfare.”
- ADD AUTOMATIC STABILIZERS:
- If the economic recovery falters later in 2021, Congress will be forced to create another relief bill to prevent millions of Americans from reaching an unemployment benefit cliff at the end of September, much like what happened at the end of 2020. However, if the bill had automatic stabilizers which tie federal aid to economic conditions, it would remove the need to pass more legislation. Some options for “off-triggers” versus artificial deadlines are described here and in chart in “Resources” below.
- Treasury Secretary Janet Yellen supported this concept during testimony at the United States Committee on Finance. “Automatic stabilizers play a critical role in mitigating the negative impacts of recession. I am eager to work with Congress on ways to automatically adjust the length and amount of relief depending on health and economic conditions so future legislative delay doesn’t undermine the recovery and families’ access to benefits they need.”
- Also a serious polical issue to consider: if the American Rescue Plan is passed using reconciliation, the rules for that procedure limit the use of spending, revenues and debt limit to once each during a fiscal year. Mitch McConnell and his GOP cohorts would be happy to hold the extension of unemployment benefits beyond September hostage because Democrats would need 60 votes to pass any additional legislation. Bad press for the Democrats near a mid-term election.
- Automatic stabilizers could help in other areas beside unemployment checks.
- Since the pandemic began, roughly 6.2 million workers lost access to their employer-sponsored coverage. Automatic price stabilizing would help those iwho were earning too much to qualify for that Medicare in states that haven’t expanded the program, but too little for marketplace subsidies under the Affordable Care Act.
- Indivar Dutta-Gupta, co-executive director of the Georgetown Center on Poverty and Inequality, says it makes sense to offer automatic paid leave to parents when schools get unexpectedly shut down –- which can happen in extreme weather events like hurricanes or fires as well as health emergencies.
- ZERO OUT PAYGO FOR COVID STIMULUS RELIEF:
- Under the Pay-As-You-Go Act of 2010, known as PAYGO, new laws that raise the national debt automatically trigger offsetting cuts in some safety net programs. The cuts can be avoided only with 60 Senate votes — not with the simple-majority budget reconciliation. Medicare and other social safety net programs would conceivable suffer large cuts.
- An example of PAYGO: The GOP’s 2017 tax scam, which favored the wealthy at a cost of a $1.5 trillion dollar deficit, was passed by buget reconciliation, triggering $25 billion in Medicare cuts that were only averted by the Democrats joining in on a later funding measure to stop them, as well as for other pandemic aid measures, including the GOP’s sneaky $135 billion dollar tax cut for the wealthy in the CARES Act. We shouldn’t depend on the GOP returning the favor, as they have literally everything to gain making us look bad.
- House Committee on the Budget list of resources here.
- (Bloomberg) How the U.S. Economic Stimulus can be placed on autopilot.
- (Brookings) What are automatic stabilizers?
- QuickTake explainers on Germany’s Kurzarbeit program to minimize unemployment and on how the U.K. and other European nations borrowed the idea during the pandemic.
- The book “Recession Ready: Fiscal Policies to Stabilize the American Economy.”
- The 2010 paper for the National Bureau of Economic Research, “Automatic Stabilizers and Economic Crisis: U.S. vs. Europe.”
- Bloomberg Opinion columnist Jonathan Bernstein argued that the real problem is state and local austerity during rough economic times.
- (EquitableGrowth.org) How to replace COVID relief deadlines with automatic ‘triggers’ that meet the needs of the U.S. economy