Wednesday, December 10, 2008

Unemployment relief or tax breaks?

I read a lot, and mostly serious nonfiction…mostly. But I also read People when I am getting my hair cut or my teeth cleaned and I read Parade magazine every Sunday. This Sunday, in between reading some short items called “Personality Parade” (such as Whoopi Goldberg has a significant other but won’t say anything about this person even to Barbara Walters, or speculating as to why Tom Selleck has never made it on the Big Screen) and a longer article about Clint Eastwood who has just turned 78, I came across this very short item:

Unemployment Funds at Risk

Nineteen states—including New York, Ohio, Indiana and North Carolina—are in danger of running out of money to pay unemployment benefits. Michigan has already drained its state fund and is $340 million in debt. Unemployment benefits are paid from a tax charged to businesses. But so many people currently are unemployed that benefit payments exceed employer contributions.

During the 2001 recession, the federal government gave $8 billion to replenish state unemployment accounts nationwide. But many states use the money to lower taxes instead. Now they may have to reduce benefits, redefine who is eligible, or require that recipients do a certain number of job searches or be out of work for a set number of weeks before they get any money.

‘The financial picture is looking pretty dismal,” says Sujit CanagaRetna of the Council of State Governments. “Perhaps states will learn this time that they need to replenish funds during strong economic years to have enough cash on hand to cope with a downturn.’
(Parade, Dec 7, 2008, pg 9)

I had to read it twice. States used federal money (which comes from taxpayers) earmarked for unemployment benefits to lower taxes. And of course, lower taxes for who or what? The unemployed? Well, hardly. The poor? Not likely since really poor people may be gouged by sales tax but usually don’t pay much or any income tax. Without doing a lot of research I can’t say who received these tax benefits, but based on history I imagine it was wealthy people and corporations.

So the spokesperson for the Council of State Governments, perhaps following the adage that one should lead with a joke, notes that the financial picture is “pretty dismal,” and goes on to advise putting money away during strong economic years. But the problem is that some of these states such as Michigan and Ohio haven’t had any strong economic years in years. And the other problem is the premise that the economy must go up and down in these dramatic ways, leaving people without jobs, also often without health insurance and many in homes they can no longer afford. Why do we take this for granted?

Can we not imagine an economy built around people, not profit? Can the Council of State Governments propose solutions more creative than “save for a rainy day?” How about employing everyone who wants to be employed, which would give us an unemployment rate of about 3%? And finally, what are the consequences for using tax money for purposes other than what it was supposed to be used for? In a nonprofit, a foundation or a government grant must be used according to the grant agreement or the money must be given back. I can’t expect Parade magazine to answer all these questions, but they are certainly as interesting as wondering if Madonna and Sean Penn will ever get back together.


Frances said...

Kim, this is really important and needs more attention. I wonder how much we really talk about tax cuts and their DIRECT effect on people.

Keep up the great work and how do we send this blog to our friends????

Caroline said...

If you click on the email icon at the bottom of Kim's post, you can send it with a personal note

Mberenis said...

Grrrrrrrrrreat blog!!!
When was the last time you looked at government grants? With the bailout, there is more money than ever. Don't miss out.

My Grant Blog