- Days left

IRS reveals millionaires claiming unemployment benefits

×
For most taxpayers, 2008 wasn't a year to remember. As a whole, incomes and profits tumbled while foreclosures and job losses soared. We saw the anecdotal evidence in the headlines and photos splashed across the media. (Meanwhile, unscrupulous Wall Street types took greed and avarice to a whole new level.)

Hard data from the IRS backs up what we knew to be the case: The recession hit the country hard. But the numbers also tell a shocking, much lesser-known story: Quite a few millionaires were claiming unemployment benefits, too. So while millions of Americans with struggled to keep their homes and feed their kids, a few thousand millionaires, though in not nearly as bad shape, were on the dole, too.

Giving some super-rich folks the benefit of the doubt, if you will, it appears some of them didn't have such a spectacular 2008. Seventeen of those 13,480 taxpayers who reported income of more than $10 million found themselves standing in the unemployment lines alongside nearly 9.5 million other Americans in 2008. Unemployment benefits for those taxpayers averaged $5,765. The number claiming unemployment benefits increased to nearly 3,000 for those taxpayers who reported overall income of more than $1 million.

Of course, unemployment benefits were up across the board -- nearly 25% -- at all income levels. The super poor to the super rich reported a collective total of $43.7 billion in unemployment benefits.

While those statistics may stand out merely because of the staggering amount of income involved, it's interesting that the overwhelming share of income in the top tax bracket isn't related to wages or salary. Less than 20% of the income at the top is attributable to actually working. The lion's share of income for those taxpayers at the top comes in the form of capital gains income -- even in a down economy. Lucky for those taxpayers, capital gains is generally tax favorable.

As Congress struggled this year with whether to extend benefits for those who are unemployed, questions about who should be able to claim benefits (and under what circumstances) took center stage. These taxpayer stats -- the first time the IRS has provided this level of detail on taxpayers in higher tax brackets -- will likely raise those questions again. Specifically, the discussions will revolve around whether it is fair for the super rich to claim unemployment benefits.

The rules for collecting unemployment are surprisingly easy in most states. To qualify, you generally have to earn sufficient wages (yup, the millionaires did that), suffer a job loss through no fault of your own, and meet certain criteria moving forward (usually making yourself available for work). There's no upper limit on the amount of money you can make to otherwise claim unemployment. In other words, you can't make too much money to collect; ironically, you can make too little money to claim unemployment.

The numbers of those unemployed taxpayers added to the overall grim economic picture for 2008. The IRS statistics show that total income reported on tax returns for 2008 was $8.3 trillion, a decline of nearly 5% from 2007. Factoring in the cost of inflation, the real drop was 8.4% -- the biggest dip in income in 20 years.

Even those in the top tax bracket took a hit -- there were fewer super-millionaires in 2008. Those reporting income of more than $10 million tumbled 25% to just 13,480.

The number of taxpayers reporting at least $1 million in income also dropped. Overall, the number of millionaire wage earners took a tumble of nearly 22%. The total income reported by those millionaires was a whopping $1.08 trillion, or about 13% of all income.

Even as millionaires garnered unemployment, they also reaped Social Security benefits, too. Nearly 57,000 taxpayers who reported more than $1 million in income in 2008 also collected Social Security payments. Taxpayers who pay into the Social Security system are entitled to payouts at certain ages. As the trust fund depletes (with concerns that it will run out at some point between 2040 and 2080), many believe that Social Security distributions should be income dependent.

All this makes me wonder: Should any government benefits be income dependent? Or should you be allowed to receive benefits irrespective of your income level?

For more information about income levels and classes of income, check out the Tax Statistics page on the IRS website.

Increase your money and finance knowledge from home

Intro to Retirement

Get started early planning for your long term future.

View Course »

Advice for Recent College Grads

Prepare yourself for the "real world".

View Course »

TurboTax Articles

Will Medicare/Medicaid be Impacted by ACA?

The Affordable Care Act put in place significant tax-related programs that impact Medicare and Medicaid, such as increased Medicare taxes on earned and unearned income for high-wage earners, and Medicaid changes that increase the number of insured individuals. Establishing whether you are affected by the ACA-imposed taxes, or are eligible for certain health programs that fall under the Centers for Medicare and Medicaid Services, is determined by filing your income tax.

8 Things You Think Are Tax Deductible That Aren't

There?s a fine line between looking to save money on your taxes and taking deductions that will raise eyebrows at the Internal Revenue Service. Some taxpayers are tripped up by expenses that they assume are tax deductions, but don?t qualify under IRS guidelines. Here are a dozen items that can lead to unpleasant surprises in case of an audit.

Essential Tax Forms for the Affordable Care Act

The Affordable Care Act (ACA), also referred to as Obamacare, affects how millions of Americans will prepare their taxes in the new year. The law now includes penalties for all who haven?t obtained health insurance -- and those penalties are expected to be paid at tax time. The ACA also provides tax credits to help people pay for insurance, and you can claim those credits when you file your taxes. The Internal Revenue Service (IRS) has introduced a number of tax forms to accommodate the ACA.

How to Determine if You Have Minimum Essential Coverage (MEC)

The Affordable Care Act, also known as Obamacare, requires most Americans to have health insurance that meets a government standard known as "minimum essential coverage," or MEC. Whether your insurance qualifies as MEC depends not on the plan itself, but on how you obtained your coverage.

What are 1095 Tax Forms for Health Care?

In 2014 the Affordable Health Care Act, also known as Obamacare, introduced three new tax forms relevant to individuals, employers and health insurance providers. They are forms 1095-A, 1095-B and 1095-C. These forms help determine if you need to comply with the new shared responsibility payment, the fee you might have to pay if you don't have health insurance. For individuals who bought insurance through the health care marketplace, this information will help to determine whether you are able to receive an additional premium tax credit or have to pay some back.

Add a Comment

*0 / 3000 Character Maximum