Just a day after unveiling their COVID-19 relief bill, Senate Democrats moved Friday to tweak it, cutting the weekly federal unemployment supplement from $400 to $300, but extending the benefit through September rather than August.
They will also make some of the unemployment benefits tax-free.
The changes reflect the challenges Senate Democrats face in shaping a bill that will satisfy all sides of their caucus, since they will need every vote in a 50-50 Senate.
Centrists were concerned that the weekly $400 supplemental payments — part of the House-passed bill and the original Senate bill — would provide some laid-off workers with more money than they earned at their jobs, thereby discouraging them from going back to work.
Progressives and President Biden have long wanted the benefit to last at least six months.
Biden supports the changes, White House Press Secretary Jen Psaki said in a tweet Friday.
As part of the agreement, people would not be taxed on the first $10,200 of unemployment insurance benefits they received in 2020. People who have already paid taxes on their unemployment benefits would need to seek a refund on their tax returns, the aide said.
Some Americans did not realize that unemployment benefits are taxable or live in states that didn’t automatically withhold federal taxes. Many were facing big tax liabilities on their 2020 return.
The Senate introduced its version of the $1.9-trillion COVID-19 economic aid package Thursday, including a $400 weekly federal supplemental payment on top of what an individual receives through state unemployment. But overnight a new compromise was reached, the aide said. Sen. Tom Carper (D-Del.) is expected to offer an amendment making the change to the original Senate bill either Friday or Saturday.
Last year the supplemental payment was $600. That ended in the summer and was reinstated by Congress in December at $300 a week.
Action on the bill came to a standstill for several hours Friday because not every Democrat backed the change. Democrats were seen arguing on the Senate floor with Sen. Joe Manchin (D-W.Va.) about whether to back the new compromise rather than a GOP amendment sponsored by Sen. Rob Portman (R-Ohio) to lower the weekly supplemental to $300 and end it in July. The amendment does not address taxes on unemployment benefits.
Democrats hope to pass the bill before current unemployment benefits expire March 14 for more than 10 million Americans. They are using a process called reconciliation, which limits what can be included in the bill, but sets only a 51-vote threshold for passage, rather than the usual 60 needed in the Senate.
Passage is possible if the 48 Democrats and two independents who caucus with them all vote for it, with a tie-breaking assist from Vice President Kamala Harris.
“In this kind of environment where literally every single Democrat is key, so far the reaction has been positive,” Finance Committee Chairman Ron Wyden (D-Ore.) told reporters. He was among those pushing not to have unemployment expire in August, when Congress is traditionally not in Washington.
Republicans say the bill is too expensive and doesn’t focus enough on vaccinations and getting people back to work or school. They are expected to offer a slew of their own amendments over the next few days to try to reduce the cost before the Senate votes on the final package.
