So somebody explain this to me. I have a friend living out West who was on unemployment for a few months last year. Now she’s doing her taxes, and she’s discovering that — wait for it — she actually owes income tax on the money she received as unemployment benefits!
So in other words, if you’re in need, Uncle Sam will give you a pittance, and then demand a third of the pittance back a year later. That means that, in one sense, unemployment relief isn’t a grant, it’s a loan, and at an abysmal interest rate to boot. Where is the logic in this? On what planet does it make sense to treat unemployment relief as taxable income?
The worst part is that they don’t withhold for taxes on the unemployment checks, apparently, so it’s up to you to put part of your benefits away for tax time. Put part of your benefits away?!? If you’re in a position where you need unemployment relief, would you be thinking of saving for a rainy day?
The tax code is out of control. This is just the latest example. When are we going to wise up and demand reform that preserves progressive taxation while simplifying the Byzantine code?