Democrats, Republicans, and the President are in desperate negotiations to extend the Bush tax rates as the clock ticks toward the end of the year. Congress and the President have known this day would come for ten years, yet only now that the tax rates are about to expire have they decided to act.
Note to liberals: extending the Bush tax rates is not a “tax cut”. Tax rates will remain the same. If the Bush tax rates are not extended, we will see large tax INCREASES ON EVERYONE who pays income taxes.
In return for not increasing the tax rates, the Democrats want an extension of unemployment benefits. Originally in this post, I said that unemployment compensation would be extended for another year for those who have maxed out at 99 weeks. Apparently that is not true. They will be extended for those who have not already expired their unemployment compensation. Those who have received 99 weeks of unemployment have (at least for now) expired their unemployment compensation. http://hotair.com/archives/2010/12/12/a-note-on-the-unemployment-extension/
I got my misinformation directly from the President. Like so many of his speeches, President Obama was misleading: “Unemployment Insurance will also be extended for another 13 months, which will be welcome relief for 2 million Americans who are facing the prospect of having their lifeline yanked away from them in the holiday season.” http://www.unemploymentextensions.org/
So, it appears I was incorrect in that unemployment insurance will not be extended past 99 weeks, even though the President insinuated it would be. I am sorry for that misstatement. I should not have taken the President’s words at face value.
The California Employment Development Department has a fairly good explanation of this, although it varies by state. Interestingly, that website says that “Two bills were introduced in Congress that would add an additional tier of extension benefits to the maximum of 99 weeks. But there are no reports of any significant movement on the measures.” So apparently some in Congress are attempting to extend the 99 week limit.
Long-term unemployment insurance isn’t a good idea and discourages people from getting a job. It is also costly. Those who are on unemployment often claim they already paid in as unemployment taxes the unemployment compensation that they are receiving. However, that is highly unlikely.
Not to get too far into the weeds, but the Pennsylvania Unemployment Tax Rate varies on the type of employee, and ranges from 2.21 to 10.5 percent on the first $8000 of wages earned for each employee.
So, let’s say an employee pays the maximum, 10.5 percent on the first $8000 of wages. That means the maximum an employee would pay is $840/year in unemployment taxes. That’s the most they’ll pay.
How much will that employee receive should they be laid off? About one-half of their full-time weekly wage.
Isn’t that great? The most you pay in per year is $840/year and what you get back is half of your weekly salary.
Clearly, denying the extension of unemployment benefits just before Christmas would be politically unpopular. But when you’ve received months of unemployment benefits, you are on welfare. Actually, you were living on the taxpayers after a few weeks of unemployment benefits.
If the current tax rate extension/unemployment extension bill should pass, come January Congress should quickly consider when and how they are going to stop extending/start reducing unemployment insurance. All they’ve done is kick the unemployment insurance can down the road—again, and it is unlikely that the unemployment rate will be any lower at the end of 2011 than it is now.
Like all entitlements, once you start giving them out, they are very difficult to rein in.
Tomorrow: An example of why extending unemployment insurance isn’t a good idea.