The crisis days of the pandemic were easing in 2021, but plenty of people still rushed to collect unemployment, including more than 300 people the IRS says made at least $10 million in income that year.
They were among nearly 15,000 mega-millionaire taxpayers — those who earned at least $1 million that year alone — who also took government-funded jobless benefits.
All told, the IRS figures the million-dollar club got nearly half a billion dollars in unemployment benefits in 2020 and 2021.
Sen. Joni Ernst, Iowa Republican, called it “welfare for the well-off” and said it’s time Washington shuts it down.
“Perhaps nothing better represents the out-of-touch, upside-down priorities of Washington than this reverse-millionaires tax that takes from small businesses and workers living paycheck to paycheck to reward the idle rich living their best lives,” she said.
Known officially as Unemployment Insurance, the benefits are a federal-state partnership. The feds oversee it, but each state runs its operation and provides the funding, based on a tax on employers.
It’s meant to be a lifeline for those who find themselves jobless through no fault of their own. And states are forbidden from using someone’s income to deny them benefits.
During the pandemic, Uncle Sam stepped in and ordered more generous benefits, with federal taxpayer money covering the cost.
Overall use went from 3.1 million beneficiaries in 2019 to 18.1 million beneficiaries in 2020. The average payout surged from $5,137 to $13,477.
Among the mega-millionaires, the IRS didn’t even report how many collected unemployment in 2019 because the numbers were so small they could have implicated individual taxpayers’ privacy rights. But the year before, in 2018, the tax agency said 3,274 people with at least $1 million in income got jobless benefits.
That surged to 19,015 in 2021, then dropped to 14,972 in 2022.
Surprisingly, the average payout to mega-millionaires went up, from about $13,900 to nearly $14,300.
The idea of millionaires getting unemployment has some defenders.
Amid the Great Recession, when Congress also approved enhanced benefits and millionaire numbers rose, The Atlantic, a left-leaning publication, rose to defend the idea saying the millionaires had likely paid into the system for years and were owed when hard times hit. Besides, they didn’t qualify for a lot of tax breaks aimed at the poor, so “they may as well cash in this once.”
“Only a fool wouldn’t do that,” wrote then-associate editor Daniel Indiviglio.
The Congressional Research Service last year issued a report saying states might struggle to administer a program that requires them to check income.
Using the federal tax code to recapture the money is another option, but CRS said that “may further complicate an already complicated tax form.”
Besides, CRS averred, it could chase some people away from applying for benefits they are entitled to.
“While conditioning eligibility for UI benefits based on income may decrease expenditures, the policy may erode the underlying goal of providing insurance against involuntary unemployment for all workers,” CRS said.
It’s also likely that some of the taxpayers are joint filers where one spouse earned almost all of the income and the other claimed unemployment.
According to the IRS’ data, 1.7% of all mega-millionaires claimed unemployment in 2021.
The rate for those making $100,000 to $1 million was 6.7%, and for those making $50,000 to $100,000 was 8.3%. Those making less than $50,000 claimed unemployment at a 14.1% rate.
The idea of millionaires getting unemployment payments has irked lawmakers for years.
In the wake of the 2008 financial collapse, then-Sen. Tom Coburn got his colleagues to pass legislation to bar those with million-dollar incomes from receiving the benefit. It cleared on a 100-0 vote in 2011, but the House took no action.
Instead, the House approved a plan to tax unemployment benefits for high-income taxpayers, rising to a 100% tax on those with a gross income of $1 million or more. That plan also failed to clear Congress.
That meant millionaires were still eligible to sign up when the pandemic struck and Congress rushed to pass generous new payment terms for the jobless.
Ms. Ernst said it’s time to revisit the issue.
“My bipartisan bill will kick thousands of millionaires off the public dole, but I do want to wish each of them the best of luck with their job search,” the senator said.