Income Inequality Narrowing Proposal #5: Adjust Federal Unemployment Wage Maximum for Inflation

I have recently posted 4 key Income Inequality Narrowing Proposals that in all fairness are needed to somewhat counterbalance the massively Income Inequality Expanding Tax Extender Tax Loopholes presently being debated in the US Senate.

Let me again present my first 4 Income Inequality Narrowing Proposals:

1. The Fair Income Tax Credit
2. An Increase in the US Federal Minimum Wage
3. Student Education Loan Reforms including permitting students to refinance both all of their Federal Education Loans and all of their Private Financial Institution Education Loans at the current market interest rates
4. Huge US Infrastructure Investments 

And then here is my #5..... Adjust Federal Unemployment Wage Maximum for Inflation

Let me explain #5.

The US Congress has wisely and fairly raised the annual Social Security Wage Maximum for inflation. What this has done is to fairly build up the Social Security Trust Fund.  If this Wage Maximum, which was $113,700 in 2013, had not been wisely adjusted for annual inflation, there would presently be a substantial deficit in the Social Security Trust Fund.  After all, here is the Social Security annual wage limit for different historical years: 

•  1950…..$3,000
•  1976....$15,300 
•  2000…$76,200  
•  2012..$110,100

 
So, certainly the Federal Unemployment Wage Limit has also likewise been adjusted annually for inflation?
 
Well, guess what, it hasn’t at all….not even inflation for one year.
 
The Federal Unemployment Tax Act was passed in 1976 (38 years ago), when the Social Security Annual Wage Limit was only $15,300.  Thus, the 2013 Social Security Wage Limit of $113,700 in 2013 is more than seven times such Wage Limit in 1976, when the Federal Unemployment Tax Act was passed. 

But yet the Federal Unemployment Wage Limit in 2013 of the first $7,000 of each employee's wages is precisely identical with that of 1976.  Go figure! 

With such incredible US Government lack of foresight, it only makes sense that Government Unemployment Compensation Funds will run out during recessions and especially in all years during and after the financial meltdown in 2008. 
 
This is clearly a massive tax loophole where US businesses haven’t had to increase their Federal Unemployment Annual Wage Limit for inflation.  Thus, they have paid substantially less in annual Federal Unemployment Tax than they should have.
 
So how to close this clearly abusive tax loophole?
 
Well, it wouldn’t be wise to catch up the Wage Limit for all of the inflation since 1976 now.  That would increase the 2014 Federal Unemployment Taxes Paid by Employers by more than 7 times.
 
I think a reasonable way to deal with this massive employer tax loophole is to increase the 2014 Federal Unemployment Wage Limit for each employee

•  from $7,000 to $10,000 for all large employers with 2013 Total Revenues above say $1 bil
•  from $7,000 to $9,000 for all large employers with 2013 Total Revenues from say $500 mil to $1 bil, and 
•  from $7,000 to $8,000 for all large employers with 2013 Total Revenues from say $250 mi to $500 mil.  

And then for employers of all sizes, the Annual Wage Limit should be adjusted each year for inflation, starting in 2015.
 
In doing so, you should also be able to avoid the annual messy negotiations on extending Unemployment Compensation Benefits.