Wednesday, February 24, 2010

ObamaCare: Medicare Payroll Tax to be Applied to Capital Gains, Interest Income

Since President Obama refuses to release anything but the happy meal version of his health proposal, we are forced to analyse by leaks.

WSJ has a couple of those. They are enough to make one sick, before the plan even kicks in:
This new ObamaCare bargain would for the first time apply the 2.9% Medicare payroll tax to "interest, dividends, annuities, royalties and rents," so-called passive income that we are told includes capital gains, though the latter wasn't explicitly mentioned in the proposal. This antigrowth investment tax would apply to singles earning more than $200,000 and joint filers over $250,000 and comes on top of the Senate's 0.9-percentage-point increase in the payroll tax, which would bring the combined employee-employer share to 3.8%...

The rate hike on investment income would presumably take effect at the same time the 2001 and 2003 Bush tax cuts are due to expire next year, bringing the top rate to 22.9% as the current top capital gains rate would also rise to 20% from 15%. That's a 52% jump...
In part this is a sneaky way of waging the House's war on "the rich" by other means while appearing to compromise. Speaker Nancy Pelosi's 5.4-percentage-point "surcharge" on modified adjusted gross income above $1 million—which also includes capital gains—was supposedly too extreme for the Senate, but the White House is trying to smuggle in its 2.9-percentage-point cousin. Of course, $250,000 is a lot lower income threshold than $1 million, and the rate can always be inched up later once the tax is already in place...

The House surcharge is certainly destructive but it is at least above-board. The White House levy muddies up both the tax code and Medicare financing.
And just what kind of disclosure do we have of the proposal when WSJ has to use phrases like:

"...we are told includes capital gains, though the latter wasn't explicitly mentioned in the proposal..."

"would presumably take effect"

Where's the outrage over the fact that Obama won't even release his actual proposal?

A note to WSJ, a tax on interest income is not only a tax on the rich, there are a lot of retirees who use interest income as a supplement to barely get by. This is a tax on anyone that isn't a direct favorite of Obama. We do take WSJ's scary point that the 2.9% medicare payroll tax on capital gains, interest etc. will be "smuggled" in at this rate and then inched up. Could you expect less from a anti-capital formation President?

1 comment:

  1. This is a stupid idea that will increase medical costs, help kill investment, and extend the current economic troubles.