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1 1 (December 19, 2022)

handle is hein.crs/govejvb0001 and id is 1 raw text is: Congressional Research S& Infrmring the legislitive debate since 191 December 19, 2022 Unemployment Insurance and Millionaires: Recent Data and Policy Considerations Under the federal-state Unemployment Insurance (UI) system, unemployed workers-including high-income workers-who meet program requirements are eligible to receive UI benefits. States, which determine many of the eligibility requirements for UI benefits, may not restrict eligibility based on individual or household income. The now-expired enhanced UI benefits created by Congress in response to the COVID-19 pandemic substantially increased total spending on UI benefits. Increased UI expenditures are reflected in both wider UI benefit receipt and higher UI benefit amounts by households with different levels of income. Background States may not restrict UI eligibility by income level other than considering those income sources deemed related to their unemployment. This requirement is based upon a 1964 U.S. Department of Labor decision that precludes states from means-testing to determine UI eligibility. The U.S. Labor Secretary expanded the restriction on means-testing to severely limit the factors states may use to determine UI entitlement. Under this interpretation, federal law requires entitlement to compensation to be determined from facts or causes related to the individual's state of unemployment. Thus, the Labor Department requires that states pay UI benefits to all eligible workers regardless of their income level because the income levels did not influence the fact or cause of unemployment. Recent Data Data on UI receipt by income level are available annually from the IRS Statistics of Income (SOI), Individual Income Tax Returns Publication 1304. The SOI uses a stratified random sample drawn from individual tax returns. Data are selected before audit from the IRS. Table 1 presents recently released 2020 data, including the number of tax returns reporting UI income and the amount of UI income by adjusted gross income (AGI). SOI estimates are based on tax returns from tax filing units, which include an individual's income or a married couple's income. Therefore, reported income may come from an individual receiving UI but may also include income from a spouse. Also, these tax filing data somewhat understate the total number of individuals receiving UI income. If a tax filer's total income from taxable sources is below the filing threshold, the tax filer is not required to file a tax return. If the individual or household does not file a return, they are not included in SOI data. If the individual or household files a tax return but their total income is not taxable, they are categorized as a nontaxable return. Thus, tax return data do not include the full amount of UI received by individuals. Table 1. Estimated Tax Returns with Reported Unemployment Insurance Income, Tax Year 2020 Number of UI Income Share of Returns (thousands) UI Income Total returns 29,901,078 $405,286,667 100% Nontaxable 11,751,128 $160,669,684 39.6% returns Adjusted Gross Income (AGI) Category Under $15,000 4,897,836 $58,622,392 14.5% $15,000 to 8,035,606 $110,884,432 27.4% under $30,000 $30,000 to 6,635,340 $96,343,498 23.8% under $50,000 $50,000 to 6,244,871 $85,704,713 21.1% under $100,000 $100,000 to 3,249,149 $42,469,211 10.5% under $200,000 $200,000 to 819,260 $10,995,360 2.7% under $1 million $1 million 19,015 $261,061 0.1% Source: Created by CRS using IRS SCI data 2020, Table 1.4. Notes: AGI is total income minus statutory adjustments. Data are IRS estimates based on a stratified random sample of tax returns before any audit had been conducted. UI income is rounded to the nearest $1,000. IRS Table 1.4 applies the term Unemployment Compensation when referring to UI benefits. The federal income taxation definition of Ut benefits includes regular state Unemployment Compensation (UC) benefits, Extended Benefits (EB), Trade Adjustment Assistance (TAA) benefits, Disaster Unemployment Assistance (DUA), and railroad unemployment benefits and has included all temporary UI benefits since UI benefits became taxable. As seen in Table 1, out of the estimated 29.9 million households reporting UI income and filing a tax return, just over an estimated 19,000 households with at least $1 million in AGI received UI benefits in tax year 2020. The approximately $261 million in UI benefits paid to these households represents less than 0.1% of total UI benefits reported to the IRS. In 2020, the enhanced COVID-19 UI benefits provided an unprecedented expansion of benefit amount (an additional

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