Bill Overview
Title: To amend the Internal Revenue Code of 1986 to exempt certain late unemployment payments from taxation.
Description: This bill excludes from the gross income of a taxpayer up to $10,200 in unemployment compensation issued to the taxpayer for calendar year 2020, but not received until 2021. This exclusion applies to taxable years beginning after December 31, 2020.
Sponsors: Rep. Thompson, Mike [D-CA-5]
Target Audience
Population: Individuals who received unemployment compensation for 2020 in 2021
Estimated Size: 4000000
- The bill targets people who received unemployment compensation in 2020 but did not receive the payments until 2021.
- Only the portion of unemployment compensation up to $10,200 is applicable for exclusion from income tax.
- The bill is focused on adjusting tax obligations for late unemployment payments, providing relief primarily to individuals who faced delays in receiving their benefits.
- This legislation will impact individuals who had delays in their unemployment payouts processing by state agencies, which could include a significant portion of those who were unemployed in 2020 due to the COVID-19 pandemic.
Reasoning
- The policy targets taxpayers who were impacted by delays in receiving unemployment compensation during the pandemic in 2020. The exclusion of $10,200 from taxable income can provide considerable relief, especially for lower and middle-income individuals who can highly benefit from decreased taxable income.
- Given the restricted budget, only a fraction of those qualified will be able to effectively utilize the policy, meaning its impact will be varied across the target population.
- A significant part of the target population will still experience economic hardships, but for those who benefit, even a reduced tax obligation can enhance overall wellbeing.
- The policy will have a variable impact based on an individual's existing financial circumstances, their total amount of unemployment benefits, and whether other relief efforts from the pandemic era already addressed their needs.
Simulated Interviews
Software Engineer (San Francisco, CA)
Age: 34 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 1.0 years
Commonness: 15/20
Statement of Opinion:
- I'm grateful for any assistance that eases the financial burden from the pandemic.
- This policy feels a bit late since I've already adjusted my finances and paid taxes based on 2020 income.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Manufacturing Worker (Detroit, MI)
Age: 45 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 2.0 years
Commonness: 10/20
Statement of Opinion:
- This policy helps, but I wish it came sooner.
- I've struggled to find consistent work since losing my job.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 5 | 4 |
| Year 3 | 5 | 4 |
| Year 5 | 4 | 4 |
| Year 10 | 4 | 4 |
| Year 20 | 4 | 4 |
Freelance Artist (Austin, TX)
Age: 28 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 12/20
Statement of Opinion:
- Having less tax means I can save a bit more for emergencies.
- The financial relief comes too late to fix the hardest time I went through.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Restaurant Manager (Miami, FL)
Age: 52 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 2.0 years
Commonness: 14/20
Statement of Opinion:
- It's a relief to know that not all the unemployment money will be taxed.
- I had to make tough choices during the pandemic, and every little helps.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Retail Worker (New York, NY)
Age: 40 | Gender: male
Wellbeing Before Policy: 3
Duration of Impact: 5.0 years
Commonness: 11/20
Statement of Opinion:
- This is a welcome policy change, but much delayed.
- I've been under severe stress due to late payments and ensuing debts.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 3 |
| Year 2 | 5 | 3 |
| Year 3 | 5 | 3 |
| Year 5 | 4 | 3 |
| Year 10 | 4 | 3 |
| Year 20 | 4 | 3 |
Event Planner (Seattle, WA)
Age: 38 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 3.0 years
Commonness: 13/20
Statement of Opinion:
- I'm glad this policy acknowledges the delays we faced in receiving our benefits.
- Any tax relief is beneficial, though it won't completely solve my financial issues.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 5 | 4 |
| Year 3 | 5 | 4 |
| Year 5 | 4 | 4 |
| Year 10 | 4 | 4 |
| Year 20 | 4 | 4 |
Graphic Designer (Chicago, IL)
Age: 30 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 2.0 years
Commonness: 12/20
Statement of Opinion:
- The extra tax relief ensures I have more breathing room financially.
- It's a positive step, though it’s a bit late when considering my past struggles.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Construction Worker (Houston, TX)
Age: 50 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 4.0 years
Commonness: 14/20
Statement of Opinion:
- The tax reduction is appreciated, especially given the slow return to normalcy.
- It's better late than never, but it doesn’t change my current struggles.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 5 | 4 |
| Year 3 | 5 | 4 |
| Year 5 | 4 | 4 |
| Year 10 | 4 | 4 |
| Year 20 | 4 | 4 |
Musician (Nashville, TN)
Age: 29 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 2.0 years
Commonness: 13/20
Statement of Opinion:
- The tax break will allow me to invest more in getting back on my feet.
- This policy is a good measure, albeit coming quite late.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Accountant (Phoenix, AZ)
Age: 44 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 14/20
Statement of Opinion:
- This is a helpful policy for people like me who were affected by reduced work hours.
- I'm glad there's some acknowledgment of the payment delays we faced.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Cost Estimates
Year 1: $6120000000 (Low: $5500000000, High: $6800000000)
Year 2: $0 (Low: $0, High: $0)
Year 3: $0 (Low: $0, High: $0)
Year 5: $0 (Low: $0, High: $0)
Year 10: $0 (Low: $0, High: $0)
Year 100: $0 (Low: $0, High: $0)
Key Considerations
- The relief is temporary and only applies to unemployment compensation for the year 2020.
- The revenue loss for this tax exclusion may place additional short-term strain on public finances, especially with other pandemic-related expenditures.
- The estimate considers marginal tax rate and eligible population but actual impacts may vary based on actual tax behaviors and exact number of eligible claimants.