Forget waiting for the resolution of the "fiscal cliff" to see the start of taxes going up.
Affluent Americans will soon be hit with new taxes adopted as part of the 2010 health care law, reports Robert Pear at NYT.
The new levies, which take effect in January, include an increase in the payroll tax on wages and a tax on investment income, including interest, dividends and capital gains. The Obama administration proposed rules to enforce both last week.
Affluent people are much more likely than low-income people to have health insurance, and now they will, in effect, help pay for coverage for many lower-income families. Among the most affluent fifth of households, those affected will see tax increases averaging $6,000 next year, economists estimate.Here's how the scheme gets even more outrageous:
In the Affordable Care Act, the new tax on investment income is called an “unearned income Medicare contribution.” However, the law does not provide for the money to be deposited in a specific trust fund. It is added to the government’s general tax revenues and can be used for education, law enforcement, farm subsidies or other purposes.
And here is another hidden tax increase:
Under another provision of the health care law, consumers may find it more difficult to obtain a tax break for medical expenses.
Taxpayers now can take an itemized deduction for unreimbursed medical expenses, to the extent that they exceed 7.5 percent of adjusted gross income. The health care law will increase the threshold for most taxpayers to 10 percent next year.
And that's not all:
In addition, workers face a new $2,500 limit on the amount they can contribute to flexible spending accounts used to pay medical expenses. Such accounts can benefit workers by allowing them to pay out-of-pocket expenses with pretax money.These hidden taxes are not going to stop. For sure, they will be tucked in every corner of the "fiscal cliff" resolution. It's going to be very ugly and expensive.
Not to mention that on the government spending side, things will continue to climb. University of Chicago professor Casey Mulligan pointed out during my interview of him that the Affordable Care Act is designed in a way to keep people from joining the workforce, which means they will be takers from the system boosting the cost of the Act, resulting in more taxes and money printing down the road.