Unemployment Fraud

WM:  The Greatest Theft of Taxpayer Dollars: Unchecked Unemployment Fraud, February 8, 2023

Everyone knew that there would be abuses as money was being shoveled out the door to keep the economy running and, as importantly, to keep people eating. The Unemployment Insurance Program, like most Social Security Act programs, does not have an asset test. If extreme spending occurred when beneficiaries received benefits, that spending would likely have occurred anyway. Even without a pandemic, huge purchases would have likely occurred. 

If the Committee wishes to claw back some of that spending, it should enact a goods and services tax. This will stop wealthy citizens from borrowing from their assets to avoid income tax to maintain an “Executive Lifestyle.” Our proposal to enact such a tax, along with employer paid consumption taxes to distribute family and health insurance benefits, can be found in the attachments.

Fair Tax proposals have again been advanced with the new majority. Our proposals would replace the IRS or Social Security from distributing benefits. Instead, employers would do so, or they would be distributed through other income maintenance programs, like unemployment insurance. Ask yourselves, do you want to keep the government as paymaster for child tax credits (which have bipartisan support) as well any Fair Tax Prebate or would you rather have employers distribute the money to offset (and possibly eliminate) their tax burden?

Like the Fair Tax, our proposals would have state governments investigate collection and evasion issues rather than the federal government doing so. Another feature of our plan is to replace capital gains taxes (including those paid on short term gains at the full tax rate) with an asset value added tax paid at sale, marked to market at the first sale after inheritance, gift or donation and at option exercise and initial offering. Doing this would make the SEC responsible for enforcement, not the IRS, and would end the need to self-report annually.

Our tax plan lists an asset VAT rate of 28.8%, which had been the amount negotiated between the White House and Senator Sinema. Now that the Ways and Means Committee is controlled by a new majority, a rate of 26%, which should be bipartisan, is more appropriate. Note that this rate would include the repeal of the Obamacare surtax. Healthcare coverage should be funded by a broad based tax, not one that targets the middle class and wealthy.

The window for bipartisan tax reform is just now open and will close quickly. There are members of Congress who are likely under investigation by the other Mr. Smith. These members come from relatively safe Republican districts, however, if the economy collapses during a special election to replace some of them, the current majority will be blamed for what is almost a certain economic downturn.

This downturn will come, not because of the Federal Reserve, but because the last of the income supports under COVID relief are expiring at the end of February. People with marginal incomes are about to experience a drop in income. That they would suddenly increase participation in the labor market is a canard. Instead, they will run up debt and stop paying certain bills, such as rent. 

Some number of enhanced SNAP, enhanced Child Tax Credit and Unemployment Insurance beneficiaries did not waste their money. They invested it, many likely doing so in crypto-currencey. If too many people cash out their coin at once, these markets will be overwhelmed, as will redemption of exchange traded fund investments holding both crypto and mortgage backed securities. Landlords will be selling liquid assets as well.

Please see the second attachment for what may be coming. Had it not been for the pandemic and supports to counter asset and wage value losses, the coming economic storm would have occurred in 2020.

We may be in for another 2008 redux. This will not come in 2024 during election season. This will come during the 2023 Special Elections to replace certain members who participated in planning actions held in concert with the Insurrection. Being part of the same general network makes one responsible for the actions of the entire network. There will be prosecutions and resignations. If these happen during an economic panic, the current majority party in the House will be blamed.

It might be wise to support the working class more than is planned - or at least rationalize the education, family support and unemployment insurance systems. Last year, I provided testimony to the House Education and Labor Appropriations Subcommittee. I have attached an excerpt here detailing permanent reforms.

Unemployment Insurance could be run like a severance pay arrangement, but with continued payments and remedial training administered by the former company in lieu of paying the a subtraction VAT (or even for a refundable credit).  Beneficiaries would continue to receive the Child Tax Credit and insurance, either from their former company, the government or any training provider offering them retraining or basic education that they missed in the past. 

Insurance for some would be short term while the dislocated worker finds a paid training program, thus stopping habits of idleness.

Attachment: Tax Reform Video links on the page

Attachment: Depression 2023 Video: https://youtu.be/0yerUsBHSeU

Attachment:Labor, HHS, Education Appropriations FY 2023

Video https://youtu.be/iho38sbZTRo