Front and Center

Politics, society, and other random randomness

Dems Say They Just Want to Go Back to pre-Bush Tax Rates. Don’t Be Fooled.

For years now, Democrats have been lobbying to have the current tax rates pushed back up to where they were before Bush II cut the rates.  The top marginal rate, now 35%, would go up to 39.6% for individuals earning more than $200,000 per year and families earning more than $250,000 per year.  Claims such as the rich need to pay their “fair share” (a term that is an undefined value, but effective in getting folks riled up), or that the rich have benefitted for long enough and need to pay up, are always used to try and bolster the argument.  I support the idea of raising the marginal rates for EVERYONE to where they were before the Bush tax rate cuts, and have said so many times.  But I discovered that, under further review, Democrats are attempting to go even further in their quest to turn high income earners into bigger cash cows for the government.

What most people don’t realize–and Dems aren’t going to hip folks to it–is that once the healthcare reform plan (“Obamacare”) goes into full effect, the tax rates for $200k/$250k earners will be more than they were pre-Bush.  How?  I’m glad you asked.

Baked into Obamacare are a number of tax rate increases designed to raise revenue to pay for the bill.  The number of taxes built in varies depending on which source you use, but there were two that jumped out at me.

First, there is a new 3.8% surtax on investment income for the over $200k/$250k crowd.  Currently, the tax rate on capital gains (profit made from an investment) and dividends (cash received for owning stock in a company) is at 15%.  The new surtax will push that rate up to 18.3%.  When the argument is made to go back up to the pre-Bush rate, which was 20%, there is no mention of the surtax.  If Democrats have their way, the rate for capital gains and dividends would be at least 23.5%.

Next, there is the 0.9% Medicare surtax, also for the $200k/$250k people.  Currently, 1.45% of everyone’s income is deducted to pay for Medicare.  Unlike Social Security, there is no cap on taxable income, so everything the person makes in income is taxed at the 1.45% rate.  However, with the new surtax, income over the $200k/$250k threshold will see a 0.9% tax increase, making the new tax rate 2.35%.  Instead of raising the top rate 4.6% to get it back to pre-Bush levels, the increase would actually be 5.5%.

A different discussion for another day is the laundry list of other taxes built in, such as the tanning tax, the medical device tax, the health insurers tax, ect.  The bottom line is, these taxes make the “we just want to go back to pre-Bush rates” argument nothing more than political foolery.  And, as usual, most of the masses fall for it.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: