Put me down as a contrarian in favor of taxing unemployment compensation. I think it's ok to allow the progressive tax structure determine how much tax one has to pay on unemployment compensation. There are a non-zero number of highly compensated individuals who get unemployment when they're laid off and I'm ok with it being taxed. There are also a non-zero number of people whose spouses are not out of work simultaneously (like Pixie) and who I'm ok with being taxed at their married filing jointly marginal tax rate.That's something I never could understand, actually. Generally speaking, unemployment money is not even close to a regular salary that (many) people earned, when they had a job. (I "think" it's something like 60% of what people made, during the employment before layoffs.)
Hence, if a person was trying to make ends meet on 60%, or thereabouts, I would think it would be extremely difficult for most to have to come up with tax money. (There are various exceptions, of course, and not to mention those with savings accounts, investments, etc., that they could pull from -- if they hadn't depleted those already, during an extensively long layoff.)
My suggestion would be some sort of sliding scale tax model for the unemployed. Now, for those who did find employment (maybe within the past 6 months), they could be asked to pay "some" tax money on their previous unemployment income; and perhaps there could be some sort of payment plan, spread over months. But for people who had not found a new job yet, I don't think it's appropriate to charge them any tax yet.
I've been unemployed for a time and received unemployment. I was fine being taxed at my marginal tax rate. I feel it is a fair sliding scale on which to pay my fair share of taxes.
@MinnieM123, that sliding scale you propose is kind of how the current system works. You end up paying tax at your annual marginal tax rate. If you find a job quickly, it ends up that you make more that year and you pay a higher marginal rate. If you don't find a job and are unemployed the whole year, your marginal rate is much lower than if you find a new job pretty quickly.