muses of the moment

March 30, 2010

Higher taxes coming your way in the next 5 years

Filed under: Social Security and Medicare, Stock Market, Taxes, The Dollar Crisis, US Government Debt — totallygroovygirlfriday @ 1:03 am

Jeff Clark outlined some scary new taxes in the Healthcare bill.

Get prepared for more donations to Uncle Sam.

Click here.

The scariest:

Assuming the Senate passes the package of changes, the biggest tax increases will be in Medicare payroll taxes. Those take two forms, both starting in 2013:

  • Singles earning more than $200,000 and couples earning $250,000 will pay 0.9% more on wages and self-employment income.
  • All investment earnings will be taxed an additional 3.8%. This includes capital gains, dividends, and interest, the first time in history the Medicare tax is applied to them.

But keep in mind that the Bush tax cuts expire at the end of this year, which will push the Medicare tax on capital gains to 23.8% in 2013 on these earners. Dividends, currently taxed at the top rate of 15%, will be taxed as ordinary income, with the top rate scheduled to rise to 39.6% (from 35%).

For example, pharmaceutical manufacturers will pay an annual fee based on their market share starting in 2011; same for health insurers, starting in 2014. A 2.3% excise tax on the sale of medical devices will start in 2013. A 10% excise tax on indoor tanning services goes into effect this July. (gg: tanning beds, really?)

How will all these businesses afford the additional tax? They won’t. You’ll pay it, through higher prices.

Perhaps most damaging to the government’s plans is if the bill leads some to ask the Ayn Rand/Atlas Shrugged questions: What if I just stop being productive? What if I stop working once my income approaches the threshold? What if I invest less so that I stay under the limits? [Your editor has already started asking these very questions and wonders why anyone with the means doesn’t prepare a potentially permanent residence outside of the U.S.—ed.]

And last, here’s the time bomb that could trump the tax concerns: none of these taxes are indexed to inflation. Since the bill fails to index to inflation the exemption threshold for the Medicare taxes on both earned and unearned income, it’s almost certain many taxpayers will get to these tax levels a whole lot quicker than they think. (gg: another pitfall of hyperinflation)

What this essentially means is there is now more incentive on the part of the government that we have inflation. If inflation reaches 10% at some point, which is below the 14%+ rate it hit in 1980 and far below any hyperinflationary level that’s possible, the $100,000 earner gets to the magical $200,000 level in seven-and-a-half years. From the government’s perspective, it makes the printing of money a lucrative affair.

Side musing: Harder and harder to have money outside the direct control of the US. Click here. That’s the plan, guys, control the flow of money, then tax the hell out of it (or just directly take it).

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1 Comment »

  1. Re: “… there is now more incentive on the part of the government that we have inflation.

    If the stated value, of “Federal” Reserve notes, declines enough with respect to copper and nickel, the 1946-2009 nickels, composed of cupronickel alloy, could completely disappear from mass circulation.

    According to the “United States Circulating Coinage Intrinsic Value Table” available at Coinflation.com, the March 29th metal value of these nickels is “$0.0588943” or 117.78% of face value.

    Comment by David Wozney — March 30, 2010 @ 10:18 am


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