Final answer:
True, Congress did amend the tax code to make unemployment benefits taxable, with changes evolving over time, particularly during the economic challenges of World War II with the Revenue Act of 1942.
Step-by-step explanation:
The statement that Congress amended the Code to make unemployment benefits taxable after dissatisfaction with the Internal Revenue Service's (IRS) treatment of unemployment compensation is true. Initially, unemployment benefits were not subject to federal income tax; however, this changed with legislative adjustments over time. More specifically, after the Great Depression, the Social Security Act of 1935 established a state-run system of unemployment insurance, facilitating a financial safety net for the unemployed. Workers pay into a state fund while employed and receive benefits when unemployed. During the 2008-2009 recession, federal fiscal policies, including automatic stabilizers like unemployment insurance, played a significant role in cushioning the economic blow for individuals by replacing a portion of their salaries.
The taxation of unemployment benefits was seen as a way to generate revenue during World War II, when the Revenue Act of 1942 increased the scope of income subject to federal taxes. Not directly related to dissatisfaction, the evolving tax treatment of unemployment compensation through the years highlights the intersection of public policy, economic theory, and the need for government revenue.