McHugh Introduces Legislation to Help Unemployed Workers Keep More of Their Benefits

Submitted article

Congressman John M. McHugh (R- Pierrepont Manor) announced today that he has introduced legislation, H.R. 6844, the Suspension of Federal Income Tax on Unemployment Benefits Act of 2008, to help unemployed workers keep more of their benefits.  Congressman McHugh’s legislation would suspend the federal income tax on unemployment compensation benefits for two years.

“I cannot overstate the importance of helping workers throughout Northern and Central New York, and the country, as they struggle with high unemployment levels.  The federal government should not be taxing the very benefits families are trying to use to make ends meet through a difficult period of temporary unemployment, particularly given the increased cost of living,” said Congressman McHugh.  “I worked earlier this year to try and extend unemployment benefits for workers in need, and I firmly believe that we should pass this new legislation to help families across the country before Congress adjourns for the year.  These extra benefits could make a big difference for a family that is struggling as well as stimulate the national economy.”

Prior to 1979, unemployment compensation payments were excluded from federal income taxation and it was not until 1986 that Congress made such benefits fully taxable.  Congressman McHugh’s legislation would suspend that practice for two years, providing additional resources for unemployed workers during a period of increased living costs and a sluggish economy.  Additionally, the Congressional Budget Office has previously estimated that the cessation of income taxes on unemployment benefits could return at least $3.1 billion annually to taxpayers.

Nationwide, average federal unemployment benefits are $294 a week, a benefit that has failed to keep pace with the rapidly increasing cost of living.  An individual who elects to have federal income taxes withheld at a rate of 10 percent will lose approximately $117 a month, money that could be better used to buy necessities such as food, housing, health insurance, and gasoline for themselves and their family.  Additionally, since many states also choose to make unemployment compensation subject to state income taxes, individuals lose more of their money to taxes.

As of August 2008, 9.4 million Americans were unemployed, an increase of 2.2 million from just a year ago.  Nationally, the unemployment rate has risen from 4.7 percent to 6.1 percent.  In the 23rd Congressional District, five counties – Clinton, Franklin, St. Lawrence, Fulton, and Oswego had unemployment rates over 6 percent in July.  On September 4, 2008, the U.S. Department of Labor announced that initial unemployment insurance claims had increased by 15,000, to 444,000, over the previous week and that approximately 3.44 million Americans are now receiving unemployment compensation benefits.

Congressman McHugh voted to pass legislation in June that would extend the unemployment benefits for an additional 13 weeks.  The legislation passed the House of Representatives and now awaits action in the Senate.  Cosponsoring Congressman McHugh’s new piece of legislation are Reps. Randy Kuhl (R-NY), Phil English (R-PA), Ron Paul (R-TX), and Mario Diaz-Balart (R-FL).