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
2009, the unemployment rate was 7.8% in December 2012, up from 4.4% in
In response to the sustained period of high unemployment rates, Congress has
enacted several laws that extend Unemployment Insurance (UI) benefits.
Currently, UI benefits are available for up to 93 weeks, a period longer
than during any previous recession. The additional months of benefits are
made possible with the temporary Emergency Unemployment Compensation (EUC08)
program authorized by the amended Supplemental Appropriations Act of 2008 (P.L. 110-252).
In addition, the American Recovery and Reinvestment Act 2009 (P.L. 111-5, as amended)
temporarily provides for 100% federal financing of the Extended Benefit (EB)
program through December 31, 2013.
The temporary, long-term extensions of UI benefits have occurred at a time when
the federal government and the states face serious budget constraints. The
debate in Congress over the extension that was authorized in 2012 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.
Several other bills introduced in the 112th Congress
would have restricted unemployment benefit receipt based on income (i.e.,
they would have changed the current requirement to provide unemployment
benefits to all workers without income restrictions). S. 1944 would have
imposed an income tax on unemployment benefit income for certain
high-income tax filers, among other provisions. S. 1931 included the same
provisions for a tax on unemployment benefits received by high-income
individuals as H.R. 3630. H.R. 235 and S. 310 would have prohibited the use of federal
funds to pay UI benefits to certain high-income individuals, among other
provisions. While the debate in Congress commonly referred to restricting “millionaires”
from receiving UI benefits, the various proposals specified different
income thresholds at which the restrictions would have applied (i.e., they
varied in how they defined high-income individuals).
To inform the ongoing policy debate, this report provides information relevant
to proposals that would restrict the payment of unemployment benefits to
individuals with high incomes. Three primary areas that may be of interest
to lawmakers are addressed: (1) the current U.S. Department of Labor (DOL)
opinion on means-testing UI benefits; (2) the potential number of people who would
be affected by such proposals; and (3) policy considerations such as the
potential savings associated with such proposals, particularly in terms of
federal expenditures. The latter two issues are discussed because a small
percentage (approximately 0.02%) of tax filers receiving unemployment
benefit income had AGI of $1 million or more in tax year 2009 based on Internal Revenue
Service (IRS) data.
Date of Report: January 23, 2013
Number of Pages: 13 Order Number: R42643 Price: $29.95
For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card
number, expiration date, and name on the card. Indicate whether you want e-mail
or postal delivery. Phone orders are preferred and receive priority processing.