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In Mean-Spirited Interstate Competition, Some State Unemployment Offices Stiff Non-Residents

2 min readBy: William Ahern

One of the Obama taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. cuts for 2009 is to forgive income taxes on the first $2,400 of unemployment benefits. At the same time as that was enacted, Congress offered states a 100% federally funded extension of unemployment benefits: 13 weeks for states with unemployment rates above 6.5% and 20 weeks for states with unemployment rates over 8%. (The Bureau of Labor Statistics will update them tomorrow here, but for today, here are the state-by-state rates of unemployment.)

But non-residents are getting the shaft in some cases, as in the Maryland-DC case. Workers who live in Maryland but work in DC are required to file for unemployment benefits where they work. Usually that works out well for them because DC has fairly generous benefits, but now states are scrapping for every dollar, so DC is stiffing the non-residents out of 90% of their federally funded emergency benefits.

Here’s how DC’s office of unemployment benefits explains it:

Under the Extended Benefits (EB) program your weekly benefit amount is the same as the weekly benefit amount on your regular claim. Under federal law for extended benefits (EB) the number of benefit weeks you are entitled to is based on (1) your state of residence and (2) the unemployment rate in that state. Under the current scenario District of Columbia residents will receive 20 weeks of extended benefits, while Maryland and Virginia residents will receive 2 weeks of extended benefits.

[On April 17, the District’s Department of Employment Services confirmed by phone to at least one applicant from Maryland that non-residents will receive the same benefits as DC residents, and they temporarily removed the offending language from their web site. However, another alert Maryland resident subsequently reported on June 3 that the two-week reference has been restored. At this point, it’s hard to tell whether DC is unlawfully withholdingWithholding is the income an employer takes out of an employee’s paycheck and remits to the federal, state, and/or local government. It is calculated based on the amount of income earned, the taxpayer’s filing status, the number of allowances claimed, and any additional amount of the employee requests. unemployment benefits from non-residents who lost DC-based jobs, or if its website is in disarray.]

An alert reader points out that the DC City Council makes no mention of the differential in any of the four legislative actions it has taken on this matter. See here, here, here and here.

For people who get reduced benefits, filling out the 2009 tax return and claiming the new $2,400 exemption might be a bittersweet moment.

BTW, the National Employment Law Project has an excellent Q&A on the subject of the new law.