A group of Democrats on the tax-writing House Ways and Means Committee has introduced a bill to extend federal unemployment insurance through 2012 and provide tax relief to employers in states with outstanding UI loans.

The legislation, introduced Thursday by House Ways and Means ranking member Sander Levin, D-Mich., and Human Resources Subcommittee ranking member Lloyd Doggett, D-Texas, would prevent unemployment benefits from running out for millions of people. It comes as a deadline looms at the end of this year for the expiration of Emergency Unemployment Compensation and Extended Benefits. The federal programs currently provide Americans with up to 73 weeks of additional unemployment insurance, averaging $300 a week per person.

The bill would preserve those programs for another year. It would also relieve states that have federal unemployment insurance loans from interest charges next year, prevent higher federal unemployment taxes beginning in January on employers in insolvent states and provide a solvency bonus to states without any outstanding loans. 

Levin and Doggett were joined Thursday at a news conference announcing the bill’s introduction by Congressmen Charlie Rangel, D-N.Y., Pete Stark, D-Calif., Jim McDermott D-Wash., and Joe Crowley, D-N.Y.

“Never before has Congress allowed emergency unemployment benefits to expire with such a large percentage of Americans looking for work and we must not let that happen now,” said Levin. “We must preserve these vital programs so that millions of Americans laid off through no fault of their own can continue to make ends meet during the worst economic downturn in most of our lifetimes. Failure to act would impose enormous hardship. By mid-February more than 2 million Americans will be cut off unemployment insurance. That number jumps to 6 million by the end of next year.”

The legislation would prevent over 6 million jobless Americans from losing their unemployment benefits next year by continuing the current federal unemployment insurance programs through 2012. The Economic Policy Institute has estimated that preventing UI benefits from expiring could prevent the loss of over 500,000 jobs. The bill also would: relieve states with federal unemployment loans from interest charges next year; prevent higher federal unemployment taxes in January 2012 on employers in states that owe money to the federal government for unemployment insurance; and provide a solvency bonus to states without any outstanding loans.

The legislation would continue the Emergency Unemployment Compensation program and 100 percent federal funding for the Extended Benefits program through 2012. 

The bill would allow states with high unemployment to provide benefits under the Extended Benefits program even if their unemployment rate is not higher than in the recent past.  States would be permitted by “statute, regulation, or other issuance having the force and effect of law” to suspend the current look-back requirement under the EB program.

The measure would also continue the authority to provide extended unemployment benefits to workers covered under the Railroad Unemployment Insurance Act. The bill would also eliminate the requirement that states pay interest on outstanding Federal unemployment loans for fiscal year 2012 (due Sept. 30, 2012) if a state enters into an agreement to maintain the amount, duration and access to regular, state-funded unemployment benefits. 

In addition, the bill would eliminate automatic tax increases under the Federal Unemployment Tax Act that are due in January 2012 (for tax year 2011) from employers in states with outstanding UI loans to the federal government.  This tax relief would be conditioned on a state entering into an agreement under Section 203. 

The legislation would require states to enter into agreements to be eligible for assistance. During the period of such an agreement, a state could not alter the method of determining eligibility for, or calculating the amount or duration of, regular unemployment benefits.

The bill would provide any state without an outstanding federal loan an additional 2 percentage points on the interest paid on their unemployment trust fund balances in 2012.

The prospects for passage of the benefits extension are uncertain. The last extension of unemployment benefits was included as part of the Bush tax cuts extension deal last December, but many congressional Republicans are opposed to further extensions because of the effect on the budget deficit. A "supercommittee" of 12 Democrats and Republicans from both the House and Senate has been meeting to come up with a plan for about $1.5 trillion in deficit reduction measures. The unemployment extension may depend upon their final proposal.