The Most Surprising Tax You'll Ever Pay

When it comes to paying taxes, nobody wants to pay any more than they have to. But some taxes just seem patently unfair on their face, designed to take advantage of those least able to pay them.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at what might be the most surprising tax anyone ever has to pay. Dan notes that those who receive unemployment insurance benefits are often surprised to find out that those benefits are subject to federal income tax. Dan points out that given their function of providing minimal income support to recipients, taxing unemployment benefits seems contrary to public policy. Yet he also notes that the idea makes some sense, as unemployment benefits are designed to replace wages, so treating them like wages has some justification. Dan concludes by noting that some states are smart enough to make unemployment benefits exempt from state income tax, but for the federal government, recipients don't have much choice.