EDITOR’S NOTE: This was the best description we could find concerning the changes in Medicare taxes resulting from the Obama healthcare reform. It appears from another source that there is a ceiling of around $110,000 taxable income.
PROGRESSIVE DEMOCRATS OF AMERICA: … A clue to what is really bugging members of the GOP might be that, in Republicanese, the term “job-killing” is often a synonym for “raises taxes on the rich”. And, indeed, the PPACA bill does include some new taxes that do exactly that, and in precedent-setting ways which merit more public attention than they have received so far.
Two such new taxes of particular interest are: 1) A 0.9% addition to the Medicare payroll tax-rate on earned income exceeding $200,000 for individuals, and $250,000 for families.
2) A new 3.8% tax on unearned income (e.g. dividends, capital gains, interest, rents, etc.) for those in that high-income bracket.
These two new taxes constitute more than just an increase in federal revenue. As an article in the June 12, 2010 Wall Street Journal said, “Each tax signals a radical change in policy”. This statement might have been meant to alarm the high-income readers of the WSJ. But those of us who believe that taxes should be progressive, scaled by ability to pay, these changes should be embraced and defended strongly.
As the WSJ itself said, “The extra 0.9% levy [in the Medicare payroll-tax] puts a progressive element in what used to be a totally flat tax.” In other words, for the first time the Medicare payroll tax rate will have some progressivity built into it. This is a wonderful development, long overdue.
And regarding the second new tax, the WSJ noted that “The 3.8% tax on investment income also knocks down a longstanding wall by applying a ‘payroll’ tax to unearned income. Until now, FICA taxes for Social Security and Medicare have applied only to wages, not investment income.” Absolutely, and exactly the right direction to go. FICA taxes are regressive precisely because they have not applied to unearned income, which accrues overwhelmingly to wealthy people. This new tax finally breaks this barrier to tax fairness… (more)
