Editorial: Don’t tax the jobless: NY owes money to those who got enhanced unemployment benefits

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State Comptroller Tom DiNapoli’s numbers show that as of Sept. 30, halfway through New York state’s fiscal year, tax revenues are pouring in so much faster than anticipated that Albany can’t even accurately track it. Which happily means that in this bonanza of billions (on top of the billions in federal COVID aid) there’s plenty of money to rebate the nearly 4 million New Yorkers who had to pay state income tax on all unemployment benefits collected last year. The Legislature must send the money back to the people who never should have been forced to pay it in the first place.

Unemployment compensation has long been taxable, but during 2020, with millions out of work due to the COVID lockdown and temporarily enriched federal benefits keeping people afloat, Congress had the good sense to exempt $10,200 in jobless aid from taxation for the 2020 tax year. Once, such a change to the U.S. tax code would have automatically followed for New York’s own income taxes, called “rolling conformity,” but due other factors, Albany “decoupled,” leaving it to the Legislature to enact its own exemption.

And the Legislature failed to do so this spring before tax time, leaving 3.9 million New Yorkers who had the misfortune of losing their paychecks and collecting unemployment the added insult of having to fork over $1.4 billion to the Albany taxman even as Congress and the IRS gave them a pass.

DiNapoli’s ledgers now show that there’s $7.2 billion more in state tax receipts than the enacted budget forecast, fivefold what it would cost to rebate the jobless who had to pay a tax on their benefits. And that surplus has been growing each month. Tax collections are up another $1.8 billion since Gov. Kathy Hochul’s budget office’s projections from just a month ago.

The bill to exempt $10,200 in unemployment has 56 of 63 state senators as sponsors. What’s needed now is a serious push among the 150 Assembly members so it can be passed when the new session starts in January.

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