Do taxes pay for unemployment benefits in NYS? Confused about funding source
I was talking with my coworker about unemployment and we got into an argument about whether our tax dollars actually fund NYS Department of Labor benefits. She says it comes from our paychecks but I thought it was from regular taxes we pay. Can someone clarify how unemployment insurance is actually funded in New York? I'm genuinely curious because I want to understand where the money comes from when people get UI benefits.
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Lorenzo McCormick
Actually, unemployment insurance is funded through employer payroll taxes, not employee income taxes. Your employer pays into the NYS Department of Labor unemployment insurance fund based on their payroll. Employees don't have UI taxes deducted from their paychecks in New York. It's a common misconception that our regular tax dollars fund these benefits.
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Ayla Kumar
•Oh wow, so when I receive unemployment benefits, it's not coming from my own tax payments? That's really different than what I thought.
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Carmella Popescu
your coworker is partially right - it does come from payroll but its the EMPLOYER side not employee side. companies pay unemployment taxes based on their experience rating with NYS Department of Labor. if they have lots of layoffs their rate goes up
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Kai Santiago
•Exactly right about experience rating. That's why some employers fight unemployment claims - it affects their future tax rates with the state.
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Lim Wong
This is why I get so frustrated when people act like unemployment recipients are living off taxpayer money. It's insurance that employers pay into! I had to explain this to my uncle who was being judgmental about people collecting UI benefits.
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Dananyl Lear
•Same here! People don't understand it's literally insurance, not welfare or charity.
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Kai Santiago
The funding structure is: employers pay State Unemployment Tax (SUTA) to NYS Department of Labor based on their payroll and claims history. There's also Federal Unemployment Tax (FUTA) that helps fund the system administration. During normal times, no general tax revenue is used. However, during recessions when the trust fund runs low, the state may need to borrow from federal government or use other funding sources.
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Ayla Kumar
•This is super helpful! So under normal circumstances, my state income tax isn't funding unemployment benefits at all?
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Kai Santiago
•Correct - your state income tax doesn't directly fund regular UI benefits. The system is designed to be self-sustaining through employer contributions.
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Noah huntAce420
I've been trying to get through to NYS Department of Labor for weeks to ask questions about my claim and couldn't reach anyone. Finally found this service called Claimyr at claimyr.com that actually got me connected to a real person. They have a video demo at https://youtu.be/qyftW-mnTNI showing how it works. Saved me so much frustration with the phone system.
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Carmella Popescu
•interesting, might try that if i need to call them again. the phone lines are always busy
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