[Congressional Record Volume 154, Number 142 (Tuesday, September 9, 2008)]
[Extensions of Remarks]
[Pages E1744-E1745]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 INTRODUCTION OF THE SUSPENSION OF FEDERAL INCOME TAX ON UNEMPLOYMENT 
                          BENEFITS ACT OF 2008

                                 ______
                                 

                          HON. JOHN M. McHUGH

                              of new york

                    in the house of representatives

                       Tuesday, September 9, 2008

  Mr. McHUGH. Madam Speaker, I rise today to introduce legislation, the 
Suspension of Federal Income Tax on Unemployment Benefits Act of 2008, 
which is designed to help unemployed Americans as they face increasing 
living costs and a sluggish economy. Specifically, the bill would 
suspend the federal income tax on unemployment compensation benefits 
for two years.
  As of August 2008, 9.4 million Americans were unemployed, an increase 
of 2.2 million from just a year ago. Similarly, the unemployment rate 
has risen from 4.7 percent to 6.1 percent. Closer to home, as of the 
end of July, in New York State 522,000 people were unemployed, 
including 26,200 in the 23rd Congressional District, which I have the 
privilege of representing. Additionally, six of the 11 counties I 
represent had unemployment numbers that exceeded the national rate.
  On September 4, 2008, the U.S. Department of Labor announced that 
initial unemployment insurance claims had increased 15,000 to 444,000 
and that approximately 3.44 million Americans are now receiving 
unemployment compensation benefits, which currently average $294 a 
week. However, these benefits have been significantly eroded by 
substantial increases in the prices for consumer goods, perhaps most 
notably, food and energy.
  Many fail to realize that Americans must pay federal income taxes on 
any unemployment compensation benefits they might receive. However, 
prior to 1979, those payments were excluded from federal income 
taxation and it was not until 1986 that Congress made such benefits 
fully taxable.

[[Page E1745]]

  Accordingly, someone receiving the average unemployment benefit of 
$294 a week ($1,176 a month) who elects to have federal income taxes 
withheld will realize a loss of approximately $117.60 a month--money 
that might better be used for necessities such as food, housing, health 
insurance, and gasoline. Moreover, many States also choose to make 
unemployment compensation subject to state income taxes, which further 
erodes the assistance these hard-working Americans receive in their 
time of need.
  While I was pleased to join with my colleagues earlier this year to 
enact legislation to extend unemployment benefits for an additional 13 
weeks, I firmly believe that we should take the next step of 
immediately increasing these benefits by exempting them from the 
federal income tax. Beyond greater assistance to millions of unemployed 
Americans, this measure would also act to stimulate the economy. In 
fact, as the Congressional Budget Office has previously estimated, the 
cessation of income taxes on unemployment benefits would return at 
least $3.1 billion annually to those taxpayers who are most in need.
  Accordingly, as we consider new ways to help unemployed Americans and 
to boost the economy, I ask my colleagues to join with me to enact the 
Suspension of Federal Income Tax on Unemployment Benefits Act of 2008.

                          ____________________