IRS reveals millionaires claiming unemployment benefits
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.