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The new proposal raises taxes on savings and investment, disincentivizing both these activities. It raises the overall tax burden and includes additional "marriage penalty" tax hikes. Furthermore, it robs from Social Security, a program already headed for insolvency.
Back in November, Senate Democrats unveiled a plan that increased the Medicare payroll tax by 0.5 percent for individuals earning over $200,000 and couples earning over $250,000 (thus a marriage penalty). The following month, to raise additional revenue for the costlier version of the Senate health care bill that ended up passing, the tax was raised to 0.9 percent. But in the White House proposal released last month, President Obama decided to keep this tax, and then impose an additional 2.9 percent tax on income "from interest, dividends, annuities, royalties and rents..." But not to be undone, the House Democrats have announced that the new investment tax would be increased to 3.7 percent. This effectively means a capital gains tax hike, coming on top of the 0.9 percent tax, which comes on top of existing payroll taxes.And one other thing that's worth noting. During the campaign, Obama touted the idea of imposing a payroll tax on higher income earners as a means of helping to make Social Security solvent. Instead, he's now tapping into that revenue stream to create a new entitlement.
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