Say a CEO runs a company into the ground and walks away with a Severance package that rewards him handsomely?

Bryant

I'm sure society will survive if a few unemployed people get a leg up in life.

If the typical American started saving a hundred a month (something most cannot begin to do) it would take them a couple hundred YEARS to save the amount you want to be tax free. To hell with tax free, the government aught to impound the money and use it to feed our kids or something.

Not recurring income. Anyone getting the boot in these times needs all the money they can retain from their previous employment. To hell with taxing the non-rich unemployed.

250k is just the upper limit. Reality is a few grand for severance and taxing the money needed to sustain you is cruel. It's bad enough to get laid off, giving 1/3 of your severance adds even more unneeded stress.

I got a six-month pay severance from each. Both times, it was taxed as ordinary income. I don't think this is anything new.

in severance and it was taxed. I was also laid off a job in 1989 in Miami. I received 6 months severance and also paid tax on that. I don't understand why people are complaining because from my experience, it has always been taxed as income.

Income is income from any source derived.

as regular income as well. I thought that was a little unusual when I was terminated in 1992 and furloughed in 2002.

My six weeks of severance for six years of employment was also taxed in 1992. Social Security was withheld from it as well.

There was a threshold you had to break before they counted the unemployement as income. I only received two weeks, so I was well under that level. I don't know if that was just a temporary measure during the recession, or if it's a permanent fixture now.

Severance plans are income. It's bascially a salary despite not being required to actually work. It's no unemployment. If people can find jobs they can collect severance and their new salary.

The issue is more making sure unemployment is still strong and available and everything else for those whose severance runs out and can't find a job. I would always have assumed severance plans were taxed.

The 6th U.S. Circuit Court of Appeals ruled that the Quality Stores severance payments to former employees were not wages, and therefore were not taxable under FICA.

One part of the tax code defines wages as "all remuneration for employment." So by that standard severance would be taxable. But in a different section of the code, "supplemental unemployment benefits" are exempted from income taxes. Quality Stores which is bankrupt argued that its severance payments are exempt from FICA taxes according to the "SUB payments" definition. The Supreme Court said it was wages not supplemental unemployment benefits and therefore taxable.

Not the general taxability as income.

(That is, whether severance payments are also subject to FICA)

See: http://www.reuters.com/article/2014/03/25/us-usa-court-taxes-idUSBREA2O11R20140325

All income should be taxed.

Severance pay is income. Its compensation.

If it were tax free, don't you think the wealthy would find a way to abuse it?

Their 2000 decision destroyed the courts integrity imo.