Democrats Agree To Cut Weekly Unemployment Benefits From $400 To $300, But Exempt $10,200 In 2020 Unemployment From Federal Tax

Democrats have agreed to reduce the federal supplemental unemployment benefits in the next stimulus bill from $400 to $300 per week—a major concession to moderates like Sen. Joe Manchin of West Virginia—as the legislation enters a crucial 24 hours in the Senate.

Sen. Tom Carper (D-Del.)

The previous version of the legislation would have authorized supplemental federal unemployment benefits of $400 per week through August.

The change Democrats plan to introduce would reduce the weekly supplement to $300 but extend the benefits another month, this time through September, multiple news outlets reported Friday.

PROMOTED

It would also exempt the first $10,200 in 2020 unemployment benefits from federal income tax—a proposal that Democrats have floated once before.

Sen. Tom Carper (D-Del.) is expected to introduce the amendment during the Senate’s marathon voting session on Friday, CNN reported.

White House press secretary Jen Psaki endorsed the compromise on Friday, and added that an extra month of benefits and new tax forgiveness provisions means the amendment would provide “more relief to the unemployed” than the old version of the legislation.

“I have personally felt the benefit should be $400,” Sen. Ron Wyden (D-Ore.) said during debate on the Senate floor Friday, “but I know some of my colleagues feel otherwise. So what we’re looking at is making sure that we can get a benefit so that people can make rent and pay groceries, that we prevent that cliff, and by God, we sure as hell shouldn’t let folks who are unemployed pay taxes on those unemployment benefits that they secured in 2020.”

Some states, including Maryland, Delaware and Arkansas, have already enacted policies to exempt unemployment benefits from state income tax, too.

This isn’t the only change Democrats have made to the stimulus bill in an attempt to satisfy the more moderate members of the caucus—a critical priority because while the special budget reconciliation rules they are using to advance the package will allow it to pass with only a simple majority of votes, Democrats hold exactly 50 seats in the chamber (plus Vice President Kamala Harris’ tie-breaker vote) and cannot afford to lose a single one. Earlier this week, Biden and Senate Democrats reached an agreement to narrow the eligibility requirements for the $1,400 stimulus checks that the bill will authorize to appease Democrats like Manchin who had criticized the direct payment provision for being poorly targeted to those Americans actually in need of relief. An unintended consequence: the new eligibility criteria would create a staggering marginal tax rate of 104% for some families.

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I’m a breaking news reporter for Forbes focusing on economic policy and capital markets. I completed my master’s degree in business and economic reporting at New York

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