Some Americans are learning a jarring lesson about unemployment as they prepare their tax returns, reads a recent story from the Associated Press. Jobless benefits are taxed as income.
And how: Many are on the hook for three or four figures to the feds and their state governments, and though unemployment benefits have been fully taxable for more than 20 years, many complain that they aren't properly informed about the tax or that withholding isn't automatic.
Unemployment comp typically ranges between about $100 and $400 a week, according to the AP, varying with recent pay levels, states of residence and other factors. Tax-time problems can theoretically be minimized by requesting that income taxes be withheld from unemployment checks, or by simply setting cash aside for the April bill. The latter would be the ideal solution, if $100 to $400 a week were enough to live on in 2009.
The economic stimulus program will temporarily ease the pain by eliminating federal income taxes on the first $2,400 of unemployment benefits received this year. But some refunds have still shriveled, and former workers who labored steadily for years are now trembling before bills from that Darth Vader of creditors: the government.
Twenty years is certainly long enough for the working stiffs to learn this landmine was out there should they lose their jobs. But 20 years isnt 75 years, and 75 years ago was the last time this country faced such a swell of joblessness, and the listlessness it soon spawns.
New times call for new thinking. Pending legislation would eliminate federal income taxes on unemployment benefits (proponents believe the chances of it passing are minimal). Beyond that, the new leadership of this country is calling for more roll-up-the-sleeves, voluntary public involvement in communities.
Marry the two. Offer those whove been unemployed for an extended time the chance to volunteer their professional skills in the community (or even, for some professionals, cast a broader net using the Web) in exchange for reducing their unemployment tax bill.
Before anybody shoots down the idea by likening it to allowing the unemployed to volunteer for their stint of jury duty (why cant they, incidentally?), lets examine the details. The exchange wouldnt have to be market rate for the professional services, but an effort could be made to match volunteers with the kinds of work they find stimulating and challenging. Unemployed accountants, for instance, should have more choices than stocking the shelves of a food pantry, unless thats what they want to do (worthy and needed work these days, by the way, assuming any food pantry still has donated food to shelve).
The benefits to communities and budget-strapped charities would be obvious. The benefits to the unemployed: somewhere to go and something to do that lends them dignity as the jobless days drag on; an appeasement of Darth Vader; and, perhaps most critical, better networking opportunities and showcases for what they do best.
The benefits to tax collection entities: Skilled people would get back to work faster, probably make more than $400 a week, and so pay more in taxes. And isnt that the whole point?
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