Sunday, July 24, 2011

Forget the Debt Limit Negotiations: Taxes Are Already Scheduled to Increase

Mario Rizzo points to a Fortune article:
...few seem to be reminding us that there are already tax increases built into the current system largely to support the so-called entitlement programs. An exception to this neglect is an article by Janice Revell, “The Rising Impact of Stealth Taxes,” in the July 25, 2011 issue of Fortune.
  1. As a result of the healthcare reform bill, the Medicare tax will rise in 2013 on income over $200,000 for individuals and $250,000 for couples from the employee rate of 1.45% to 2.35%. (Employers also pay 1.45% so the total will now be 3.8%). This will not be indexed for inflation.
  2. In 2013 there will be a new Medicare tax of 3.8% on investment income for those whose wages plus investment income exceeds the above thresholds. This will also not be indexed for inflation.
  3. Then there is the un-indexed tax on Social Security benefits. In 1984 (when the tax was passed) the tax applied to 10% of retirees. Today the tax applies to one-third of retirees and, if nothing changes in the law, it will apply to nearly half in a decade.
Rizzo concludes:
President Obama and his various spokespeople are saying incessantly that deficit reduction as a requirement (thanks to the Republicans) to raise the debt limit must be done in a “balanced” manner. There must be some kind of revenue increases to go along with the spending-growth reductions. There are many ways to talk about “balance.” In this case, however, they are all normative. If you think that taxes are already too high, then higher taxes add to the existing imbalance.


  1. So they are basically mandating your hire a CPA or buy TurboTax to pay the government. Impossible to do it right otherwise. In an effort to nickel and dime is so we don't realize what is being taken from us, they create an impossible system to follow.

  2. I agree - tax increases are a foregone conclusion given that markets will start to get a hold of all this debt & demand higher interest rates aswell.

  3. Most of Congress, the IRS and the banksters should all be keeping Bernie company in the pokey. They are all crooks.