The Wall Street Journal editorializes on what it calls “ObamaCare’s worst tax hike.”
For the first time, the combined employer-worker 2.9% Medicare rate would be extended beyond wages to interest, dividends, capital gains, annuities, royalties and rents for individuals with adjusted gross income above $200,000 and joint filers over $250,000.
That would lift the top capital-gains rate to 22.9% as the regular rate bounces back to 20% from 15% when the Bush tax cuts expire at the end of this year. The top rate for dividends would rise to 42.5% when the Bush income-tax rates expire. The White House plan also raises the ordinary Medicare payroll tax by 0.9 percentage points for the same filers, bringing it to 3.8%…
…Earning even a single dollar more than $200,000 in adjusted gross income will slap the 2.9% tax on every dollar of a taxpayer’s investment income, creating a huge marginal-rate spike that will most hurt middle-class earners, as opposed to the superrich.
Even if you don’t make that much money, understand that this could hurt you, and it also sets a major precedent here. The government would begin charging a so-called “payroll tax” on non-wage income that results from saving money. If you do save up, and you happen to do well in any given year, you will suddenly begin paying Medicare taxes on the interest in your savings account.
If you own a small contracting business, let’s say, and you have prudently saved up for years, just think of the incentive you will have to do less business as the year nears its end, so as not to cross that $200,000 income threshold. You might save thousands of dollars by taking fewer jobs and giving fewer hours to your employees. Is that the kind of incentive our tax code should create?
