PROVIDENCE, R.I. (WPRI) — The American Rescue Plan signed into law earlier this year included a $10,200 federal tax exemption for unemployment benefits.
Now, Rhode Island lawmakers are pushing for legislation that would mirror that exemption at the state level.
Ever since the R.I. Division of Taxation opted to fully tax unemployment benefits, 12 Responds has received dozens of questions from viewers wondering if the state would eventually implement an exemption.
That’s why Senate Minority Leader Dennis Algiere drafted a bill that would change the state tax law.
“I think we should continue on the path we’ve been following, that is, following the lead of the government,” Algiere said.
Algiere said he’s gotten numerous phone calls from his constituents, as well as local tax preparers and accountants.
“They’ve already filed their tax returns and they didn’t realize this was going to be taxable income,” he said. “They had just assumed they were following IRS regulations.”
In a letter to Gov. Dan McKee, Algiere and his co-sponsors expressed frustration with the state’s decision not to implement an unemployment tax exemption.
“On behalf of our constituents who were so badly impacted during the last year, we respectfully request you ask your department to revisit this decision and follow the federal exemption,” the letter reads.
“The amount of revenue that our state will receive by ignoring the federal guidance and taxing unemployment benefits at 100% is negligible, but the impact it will have on more than 100,000 struggling taxpayers is significant,” the letter continues.
McKee has previously expressed opposition to the exemption, claiming it will cost the state too much money. But a spokesperson for McKee told 12 News he “looks forward to reviewing any legislation or proposals that could help provide relief to Rhode Islanders during this pandemic.”
Hearings on Algiere’s legislation and its companion bill in the R.I. House are expected to take place next week.