RI Millionaires Received Unemployment Benefits
Thursday, May 22, 2014
Millionaires and thousands of other high-income earners in Rhode Island received millions in unemployment benefits between 2007 and 2011, federal tax data shows.
In 2011, the most recently available year, nine millionaires collected unemployment benefits. An additional 44 taxpayers earning between $500,000 and $1 million were on unemployment in the same year. Overall, roughly one out in ten Rhode Islanders who received unemployment benefits earned six figures or more.
All told, $59.9 million in unemployment benefits went towards those making $100,000 or more. Of that amount, a combined $100,000 was collected by millionaire earners, with nearly another $500,000 split among those who make $500,000 or more. The average benefit for those in the $500,000 to $1 million bracket was $10,500. By comparison, those earning under $25,000 had an average benefit of about $6,700, according to IRS tax records.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTMore than $200M paid out over five years
“They should give the money back. How could they possibly need it? That’s not what the program was designed for,” said Roy Coulombe, the business manager for the Iron Workers Local 37, which has a third of its members on unemployment benefits.
“It’s crazy because we’re talking about a lot of money,” said Fred Ordonez, executive director of Direct Actions for Rights and Equality, which has advocated for the rights of the jobless.
Ordonez compares the amount paid to high-earners to the estimated amount he says would be needed to help one of the most vulnerable populations in the state: the homeless. Building permanent housing for the homeless, he says, would cost $30 million. “You compare those two numbers and you say, ‘Where are our priorities?’” Ordonez said.
The data for 2011 reflects a trend. In 2010, nearly 7,000 residents earning six figures or more owed some of their earnings to unemployment benefits. The number hovers around 5,000 for the previous two years, then drops to about 4,000 in 2007. Over the five-year period, $244.3 million went to six-figure earners. Excluding those who made less than $200,000, the number drops to $27.1 million.
Ordonez said fiscal leaders are constantly pressing for cuts to essential social safety-net programs, claiming a lack of available funding. “Yet they have enough money to throw away like this,” he said.
Rhode Island is not the only state with millionaires on unemployment. Between 2009 and 2010, 5,533 millionaires across the country earned income from unemployment, according to a May 2013 report issued by the Congressional Research Service.
The data was not a surprise to everyone. Jesse Strecker, executive director of Jobs with Justice, a social and economic justice advocacy group, said it fits into a pattern of tax breaks and subsidies that benefit the wealthiest Americans. “I see it as another manifestation of the trend of money being sucked out of working class communities into the pockets of the wealthy,” Strecker said.
State official: benefits not tied to need
Currently, those seeking unemployment benefits must meet two criteria: they must be unemployed and they must be looking for a job, according to Bob Langlais, the assistant director for income support at the Rhode Island Department of Labor and Training, who noted that requirements are set by the federal government.
Financial need, according to Langlais, is not a factor. In fact, as it now stands, federal law mandates that states pay out benefits to unemployed individuals regardless of how much they had been earning. That mandate dates back to a 1964 U.S. Department of Labor decision that bars states from using means-testing to assess eligibility, according to the Congressional Research Service.
Langlais said he could understand how people might find it incredible that millionaires could be eligible for unemployment benefits. “But you’ve got to remember, they’re unemployed when they collect,” he said.
In Rhode Island, the maximum possible benefit is $566 a week. That comes out to $14,716 for 26 weeks, the most allowed under the current state benefit system. A person must earn just a little over $27,000 to receive that benefit, which is funded through a tax employers pay on the first $21,600 of income earned, according to Langlais.
State officials review wage records to determine benefit levels, but they do not track the number of high-income beneficiaries. “I don’t go in to see how many people make a million dollars,” Langlais said.
Efforts to fix federal law fail so far
Attempts to exclude millionaires from unemployment benefits so far have failed. A Congressional bill introduced in December 2011 would have stripped benefits from millionaires by taxing them at 100 percent. But, by the time the bill made it to President Obama’s desk for signature, in February 2012, the special tax had been removed.
Earlier this year, Sen. Jack Reed, D-RI, championed legislation to restore federal unemployment benefits. That bill included a provision to exclude millionaire recipients. It passed the Senate in April, but now is languishing in the House.
Rep. David Cicilline, D-RI, is a co-sponsor of the bill, known as the Emergency Unemployment Compensation Extension Act of 2014. The bill would bar the use of any federal funds for the payment of unemployment benefits to anyone whose adjusted gross income was $1 million or more in the previous year, according to Andrew Gernt, a spokesman for Cicilline.
“In total there are 150 cosponsors. The House majority has yet to bring the bill up for a vote,” Gernt wrote in e-mail.
Symptom of a structural problem?
One progressive policy expert says the issue points to a deeper problem in how unemployment benefits are structured.
“Unemployment is structured as an insurance program. Every employer pays a premium and all their employees are covered by it. It’s not means-tested, and your check is related to how much you earned at the job you lost,” said Tom Sgouros.
“The real crime of UI [unemployment insurance] is that because it is an insurance program, when people are laid off in large numbers, every employer’s UI payments rise, and the cost of having employees goes up, increasing the likelihood of further layoffs,” said Tom Sgouros. “[T]he bottom line is that sure, millionaires might get unemployment, but the real tragedy of the system is something else entirely.”
Stephen Beale can be reached at [email protected]. Follow him on Twitter @bealenews
Related Slideshow: RI Millionaires Received Unemployment Benefits
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