Monday, December 10, 2012

How Congress Snuck in a 3.8% Tax Increase that Will Kick in on Jan. 1

I have already reported on an new tax that is going to kick in on January 1. It comes in via the  In the Affordable Care Act, the new tax on investment income is called an “unearned income Medicare contribution.

Bloomberg has some more details:
... the impending arrival of the unearned income Medicare contribution tax...will further raise tax rates on income from saving.
Scheduled to take effect on Jan. 1, the tax, which was adopted as part of the 2010 health-care law, is a 3.8 percent levy on interest, dividends, capital gains and passive business income received by taxpayers with incomes exceeding $200,000 (or $250,000 for couples).
Bloomberg also reveals how this tax was passed into law, without many aware of it at the time:
 Because the new tax was added to the health-care law late in the process without congressional hearings, it received little attention at the time. With only a few weeks left before it takes effect, it remains largely unknown.
Bloomberg outlines some Congressional lies about the tax:

One problem with the unearned income Medicare contribution tax is the name Congress chose for it, which is a triple misnomer. The income that will be subject to the tax isn’t unearned -- it is earned by savers who receive market rewards for delaying consumption and providing funds to finance business investment. 
Also, because the proceeds will be paid into the general treasury, the tax will have no financial link to Medicare. And, of course, the tax will be a compulsory payment, not a voluntary contribution.

2 comments:

  1. Also, the SSWB has been raised... another sneaky tax increase.

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  2. My company has already distributed an email about this tax. . and the change in FICA as well.

    -------

    From: , Payroll Operations Manager

    Federal Insurance Contributions Act (FICA) - Additional Medicare Tax
    The current Medicare tax rate on FICA earnings is 1.45%. In 2013, there will be an Additional Medicare Tax of 0.9% on FICA earnings that exceed $200,000 due to the 2010 Patient Protection and Affordable Care Act (Health Care Act, P.L. 111-148).

    [COMPANY] will be required to withhold 2.35% Medicare tax on wages of $200,000 and more. For example:
    Current payperiod, FICA earnings $195,000 taxed at 1.45%
    Next payperiod, FICA earnings $ 7,000
    $ 5,000 taxed at 1.45%
    $ 2,000 taxed at 2.35%
    Subsequent pay period, FICA earnings $ 7,000 taxed at 2.35% till the end of the taxable year

    Employees who anticipate a liability for additional Medicare tax due to multiple employers may request additional withholding of Federal income tax which will be applied against all taxes shown on your individual income tax return (Form 1040), including any additional Medicare tax liability.

    For more information, please see: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax

    FICA Social Security tax – Old- Age, Survivors, and Disability Insurance (OASDI)
    The temporary 2% cut in the employee Social Security tax rate is scheduled to expire on December 31, 2012. The current 4.2% rate will revert back to 6.2% unless it is extended by federal legislation.

    ReplyDelete