Press Release: Silverman Introduces Bill to Exempt UI Benefits from DC Taxes

News Release — At-large DC Council member Elissa Silverman

FOR IMMEDIATE RELEASE

CONTACT:

Sam Rosen-Amy

Puts More Money in Pockets of Those Out of Work Due to COVID-19

WASHINGTON, D.C., February 16, 2021 – A supermajority of the DC Council, led by Councilmember Elissa Silverman (I-At Large), introduced legislation today to exempt unemployment benefits from DC income taxes. The “Making Unemployment Compensation Nontaxable Amendment Act of 2021” would put more money in the hands of DC residents who have lost work or income during the COVID-19 public health emergency by not withholding monies and subjecting these payments to DC income taxes. It would also aid DC’s economy, because those dollars in all likelihood would be spent on basic goods and services at local businesses.

“This bill would put hundreds of dollars more in the pockets of DC residents when they need it the most,” Silverman said. “That money will be put to use right away on food, rent, and other basic needs. And that spending helps our local businesses, many of whom are struggling as well.”

The District has seen an unprecedented surge in unemployment insurance and pandemic-assistance related claims due to COVID-19.  In fiscal year 2020, DC paid out almost $1.6 billion in unemployment compensation, a 1,200 percent increase over the previous year. About half of the claims are from District residents. The legislation would add a line to DC income tax forms removing unemployment insurance and related benefits from the calculation of DC taxable income. With passage of the bill, the District would join eight other states, including Virginia, which don’t tax either some or all of unemployment benefits.

“We don’t tax most of the other major safety net programs like food stamps or Medicaid,” said Silverman. “Not taxing unemployment benefits is the right thing to do, and helps our economy at the same time.”

While unemployment compensation is based on where an employee or contractor works, this bill would only apply to workers or contractors who file DC income taxes. However, the benefits would still be taxable at the federal level.

If passed, the legislation will likely not go into effect until fiscal year 2022, given its cost and the need to replace those dollars in the District’s budget. Therefore, the bill would cover unemployment compensation received in 2021, leaving any benefits paid in 2020 as still taxable. Further consideration will be given to see if federal or local dollars might be used in a future tax credit or grant to address taxes for Tax Year 2020.

The legislation was co-introduced by 11 of 13 members: Brianne K. Nadeau (D-Ward 1), Brooke Pinto (D-Ward 2), Mary M. Cheh (D-Ward 3), Janeese Lewis George (D-Ward 4), Charles Allen (D-Ward 6), Vincent C. Gray (D-Ward 7), Trayon White, Sr. (D-Ward 8) and At-Large members Anita Bonds (D), Robert White, Jr. (D), and Christina Henderson (I).

The text of the introduced bill is here.