While essential workers were paying into the unemployment system during the pandemic, thousands of millionaires were out of work and collecting government checks, according to new IRS data.
More than 19,000 tax filers who reported earning at least $1 million in 2020 also collected unemployment checks that year. They walked away with more than a quarter of a billion dollars in payments, the IRS found.
Among them were 229 taxpayers who earned at least $10 million that year, yet also applied for — and took — unemployment. Nearly 700 more taxpayers collected jobless benefits despite making between $5 million and $10 million.
Sen. Joni Ernst, an Iowa Republican who in 2020 tried to draw attention to the likelihood that millionaires would get unemployment, said it was particularly galling to see them collect money while so many lower-wage workers were still on the job and paying taxes to fund the system. She called it the “reverse-millionaire tax.”
“The true million-dollar question is: why did Congress continue to pay the rich not to work?” she said.
She is announcing legislation Wednesday that would cut off federal unemployment payments to those with million-dollar incomes going forward. Sen. Jon Tester, Montana Democrat, is sponsoring the bill with her.
Millionaires are entitled to unemployment thanks to a 1964 ruling by the Labor Department, which said states could not impose a means test on the program’s beneficiaries.
Ms. Ernst’s bill would supersede that, requiring anyone applying for unemployment to attest that they fall below her $1 million adjusted gross income threshold.
The legislation would have to clear a Democrat-controlled Senate, including passing muster with Sen. Ron Wyden, the Oregon Democrat who serves as chairman of the Finance Committee.
Mr. Wyden’s office didn’t respond this week to an inquiry about the millionaires collecting unemployment, though he has backed legislation similar to Ms. Ernst’s bill in the past.
After the number of millionaires collecting unemployment rose during the 2008 Great Recession, then-Sen. Tom Coburn announced a proposal to bar them from the government spigot. It cleared on a 100-0 vote in 2011.
But the House never took action on the legislation, and it never became law, leaving millionaires to sign up when Congress expanded unemployment benefits at the stark of coronavirus lockdowns in the spring of 2020.
Those benefits were exceptionally generous, offering a $600-a-week plus-up in addition to whatever a state was already paying.
The goal was to help people stay in their homes and buy groceries as nonessential businesses shuttered during the stop-the-spread shutdowns.
IRS data shows 19,015 filers with incomes of $1 million or more reported unemployment benefit income, collecting a combined $266 million.
A slight majority of those filers earned between $1 million and $1.5 million. Roughly 7,000 others reported earning between $1.5 million and $5 million.
Millionaires have often collected unemployment, but the numbers are usually much smaller.
After the Wall Street collapse in 2008, the number of tax filers with million-dollar incomes peaked at 3,171. By 2014 the number was down to zero, according to the Congressional Research Service.
In 2018, 3,273 taxpayers with million-dollar incomes reported unemployment income. And just 34 filers who made $10 million or more reported unemployment.
The IRS didn’t report breakdowns for 2019, saying the numbers were so small that releasing the data could impinge on taxpayers’ anonymity. The IRS didn’t respond to an inquiry about the reporting thresholds.
The Congressional Research Service, analyzing the issue in 2016, said there’s a risk that imposing an income limit might end up costing more money than it saves. And it might deter people who are eligible from applying.
“For example, a person who becomes unemployed early in the year may expect (erroneously) to have income over the course of the year above the applicable threshold, and therefore may choose not to apply for benefits based on an expectation that those benefits would only be recaptured later through the tax system,” CRS said.
The millionaires have had some defenders, including The Atlantic, which in 2010 published a piece saying the amount of money involved — $5 million at the time — was too small to worry about.
The magazine said the millionaires had likely spent years paying into the system, and felt they couldn’t pass up the chance to get something back for once.
It’s also likely that among the filers are couples filing joint returns where one had a million-dollar income and the other went through unemployment.
It wasn’t just millionaires who turned to unemployment during the pandemic.
The IRS’s statistics show more than a quarter of taxpayers who reported income between $15,000 and $30,000 received unemployment in 2020.
In 2019, before the pandemic, that rate was roughly 3%