Lawmakers urge Democratic leaders to waive taxes on jobless benefits in COVID relief bill

·Chief Political Correspondent
·2-min read

A dozen lawmakers sent a letter to House Speaker Nancy Pelosi (D., Calif.) and Majority Leader Steny Hoyer (D., Md.) and the chairmen of the House Rules and Budget committees on Thursday, urging them to waive federal income taxes on some 2020 jobless benefits.

"Workers and families are still struggling with the economic pain caused by COVID-19," wrote the lawmakers. "Impending tax bills on UI benefits take away vital dollars that individuals need to pay for essential expenses like housing, health care, and food."

A woman checks information as information signs are displayed at IDES (Illinois Department of Employment Security) WorkNet center in Arlington Heights, Ill., Thursday, Nov. 5, 2020. Illinois reports biggest spike in unemployment claims of all states. (AP Photo/Nam Y. Huh)
A woman checks information as information signs are displayed at IDES (Illinois Department of Employment Security) WorkNet center in Arlington Heights, Ill., Thursday, Nov. 5, 2020. Illinois reports biggest spike in unemployment claims of all states. (AP Photo/Nam Y. Huh)

Rep. Cindy Axne. (D., Iowa) led the push and 11 other lawmakers signed the letter. Axne and Sen. Dick Durbin (D., Ill.) have introduced legislation that would waive federal income taxes on the first $10,200 in 2020 jobless benefits. It could include benefits received through the emergency jobless programs established at the beginning of the pandemic.

"Without tax relief for these benefits, however, millions of workers who claimed UI last year may face an unexpected tax bill this spring," the lawmakers wrote. "In a survey conducted last fall by Jackson Hewitt, 39% of respondents were unaware UI benefits are taxable, with single and younger taxpayers being less aware of this issue."

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Lawmakers are hoping the public pressure campaign will convince Democratic leadership to add the measure to the COVID-19 relief bill with a managers amendment. The House is set to vote on the relief package on Feb. 26.

In an interview with Yahoo Finance this week, House Ways and Means Committee Chairman Richard Neal (D., Mass.) argued "it's pretty well known that unemployment benefits are subject to federal tax."

"The challenge we have here is that we have provided supplemental unemployment insurance, and it's gone a long way toward allowing people to pay rent and make mortgage payments and put food on the table," Neal said. "As long as we're putting in the supplemental part of unemployment insurance, I'd want to take a more measured view before I embraced another concept."

Jessica Smith is chief political correspondent for Yahoo Finance, based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.

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