Windfalls for Regular People

Today on TAP: As banks and corporations made fortunes from the pandemic, some workers accidentally got too much unemployment comp. Until we enact an excess profits tax, let them keep it!

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At a time of deepening pandemic and double-digit unemployment, the bipartisan CARES Act of 2020 provided extended federal unemployment compensation, including for people such as freelancers and gig workers who were not ordinarily covered. For millions of American families, it was a lifesaver.

When government rushes to meet urgent needs in a crisis, the process is far from smooth. State unemployment offices were ill-prepared to handle either the new categories or the surge of applicants.

Now it turns out that some people either didn’t provide adequate documentation, or violated a technical requirement, or were mistakenly overpaid by overwhelmed state agencies. So those agencies are now trying to claw back benefits.

In Massachusetts alone, according to The Boston Globe, the hapless Department of Unemployment Assistance has been trying to take back $2.6 billion in unemployment benefits from no fewer than 383,000 residents of the Commonwealth. Similar actions are occurring in other states.

Let’s put this in context. At the other end of the income spectrum, shareholders and executives at Moderna reaped billions in profits—that taxpayers had already financed once through government-sponsored research. The ultra-low interest rates and massive bond purchases courtesy of the Fed translated into record financial-industry profits and executive bonuses for bankers. Oil companies and ocean shippers are making fortunes off the supply chain shocks.

Nobody is trying to claw back those windfalls. The U.S. Department of Labor has urged states to err on the side of amnesty when the overpayments to unemployed workers were the result of innocent applicant error or mistakes by the state. Amen to that.

Accidental windfalls to ordinary people is truly a man-bites-dog story, because it’s so rare. When we get serious about clawbacks in the form of excess profits taxes for the big dogs, maybe then in good conscience we can go after the modest extra payments that flowed to regular workers.

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