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Wednesday, February 24, 2010

WSJ: Obama's 'Sneaky' New Tax on Investments

Wall Street Journal editorial, Obama's New Investment Tax: A Sneaky Medicare Levy on Dividends and Capital Gains:

The White House's new health-care proposal promises the "largest middle class tax cut for health care in history," which is a creative way of describing a vast taxpayer-subsidized insurance entitlement. Naturally, the fine print goes on to describe one of the largest tax increases for health care in history, too.

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, and the last time investors were slammed with anything comparable was 1986 when the capital gains rate bounced to 28% from 20%—or a 40% increase—as part of the Reagan tax reform that reduced income tax rates. ...

If Americans need another reason to oppose ObamaCare, or more evidence of its destructiveness, here it is.

http://taxprof.typepad.com/taxprof_blog/2010/02/wsj-obamas.html

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Comments

Wow.

A 2.9% tax on rents would flow immediately right down and impact lower income wage earners who rent instead of own their houses. Then they'd be paying the Medicare tax TWICE, although fractionally. If rent was 1/3 their income they would pay

2.9% on direct income
2.9/3 plus margin in rent increase - say 1.45

This is a regressive tax.

Posted by: Spendulus | Feb 24, 2010 11:14:52 AM

Yep, this ought to stimulate the economy; NOT!

Posted by: Lyle Hartling | Feb 24, 2010 11:27:43 AM

2.9% Tax on Rents or Rental Income?
Terrible idea either way.

Posted by: Richard Marpet | Feb 24, 2010 11:50:05 AM

Fortunately most retiree's investment income is way down so the tax won't hit them too hard.

Posted by: Scott Pipkin | Feb 24, 2010 12:21:02 PM

All tax is theft. Otherwise it would be called a gift or contribution.

Posted by: geoffgo | Feb 24, 2010 1:38:33 PM

Seriously, have we entered the Idiocracy?

Posted by: JorgXMcKie | Feb 24, 2010 2:15:04 PM

Do people who pay more for Medicare get a better plan? Never mind, I know the answer to that. How about, "Does every stinkin' idiot who happens to turn 65 get health care coverage, regardless of whether he or someone on his behalf paid into it or not?"

Posted by: sportutegirl | Feb 24, 2010 4:43:11 PM