The Spectacle Blog

Latest Dem Bill Raises Medicare Tax for Fourth Time — Before Even Being Enacted

By on 3.18.10 | 3:27PM

House Democrats have released the text of their reconciliation bill, which you can view here. There's a lot to go through, but it's immediately worth noting that one of the ways in which they will finance the increased spending in the latest version of their bill is to hike the Medicare payroll tax again -- making that the fourth time the tax has been hiked even before Obamacare becomes law.

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.

This follows the historical pattern of payroll taxes, which have increased 20 times since first introduced in 1935, going from a combined total of 2 percent (including employer/employee contributions) to 15.3 percent today. Now that this new tax is in place, we can only assume that if Obamacare is enacted, this pattern would continue.

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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