Thread: HC bill will repeal anti inflation Tax- surcharge applies to cap. gains and dividend

And I thought it sucked getting older.....it's gonna suck to be them .........(todays young) hopelessly saddled with ever rising taxes, trying in vain to pay down an insurmountable debt.

And yet...I do not believe there is a single economist that believes inflation tax is sound.
In effect, it punishes those with the least assets.
Few wealthy people have funds in pure cash, but of course have it in interest bearing vehicles of one kind or another. Moderate to lower income people are the ones whose money is primarily in cash...thus, it will be them that pay the most. At the same time, because it is primarily lower income people - there is not much to gain from it either..so in effect all you do is drain money from moderate to lower incomes..with little appreciable revenue for the government.

Right now..this quick...I just went to some investment sites, and a few already have articles about how to avoid the tax if it passes. So as you can see - those who lizard woman wants to squeeze will have already taken steps to avoid the tax...before it even takes affect.
Oh...and I could be wrong, but I believe pensions and other fixed income will take a hit?

how else can they keep it under a trillion a year ? I mean... HELLO !

Originally Posted by Imperator

I am sorry but I just have to say it; these muthafuckers. They are AMTing us again these walking pustules....sorry but this is just, I am in apoplexy. This is just one of those airdrops into the bill, last minute AND half the reason why she cannot possibly let her congressman go home and get hammered AND cannot and will not let the bill go online for 3 days prior because the folks just won’t get to see end runs around tax legislation like this one.

He better hope theres recovery on full blast by then, because in 11 when those cap gains go up and divides start getting whacked, there will be a big boom and that will be people slamming for the door on large scale outlays that require stock sales or pension cash ins etc....I just cannot beleive this....

The above in all probability IMO is correct. "And" IMO apart from the posibilities of investmernts finging some new avenue doing what is planned. "Affecting a change that taxes Capital gains on the same basis as earned income.

The Return of the Inflation Tax
The Pelosi tax surcharge applies to capital gains and dividends.

All of those twentysomethings who voted for Barack Obama last year are about to experience the change they haven't been waiting for: the return of income tax bracket creep. Buried in Nancy Pelosi's health-care bill is a provision that will partially repeal tax indexing for inflation, meaning that as their earnings rise over a lifetime these youngsters can look forward to paying higher rates even if their income gains aren't real.

Would not the inflation factor in effect produce the same purchasing power reduction on earned income and tax income for the government ? "Nothing changes" it's all realitive. (both represent the same constant dollar)

In order to raise enough money to make their plan look like it won't add to the deficit, House Democrats have deliberately not indexed two main tax features of their plan: the $500,000 threshold for the 5.4-percentage-point income tax surcharge; and the payroll level at which small businesses must pay a new 8% tax penalty for not offering health insurance.

My math shows the company dropping health ins and paying 8% tax on payroll would all things considred be better off than the one providing health insurance. Nocomment on the 5,4% income tax. Please explain.r

This is a sneaky way for politicians to pry more money out of workers every year without having to legislate tax increases. The negative effects of failing to index compound over time, yielding a revenue windfall for government as the years go on. The House tax surcharge is estimated to raise $460.5 billion over 10 years, but only $30.9 billion in 2011, rising to $68.4 billion in 2019, according to the Joint Tax Committee.

This is is an area subject to annual adjustment to prevent artificially pushing someone into a higher bracket.

Americans of a certain age have seen this movie before. In 1960, only 3% of tax filers paid a 30% or higher marginal tax rate. By 1980, after the inflation of the 1970s, the share was closer to 33%, according to a Heritage Foundation analysis of tax returns.

If people want others to go and have their ass shot off tfor their benefit they are going to have to pay for it. But if we're being screwed the guns no doubt will be turned in a different direction.

These stealth tax increases—forcing ever more Americans to pay higher tax rates on phantom gains in income—were widely seen to be unjust. And in 1981 as part of the Reagan tax cuts, a bipartisan coalition voted to index the tax brackets for inflation.

Agree

We also know what has happened with the Alternative Minimum Tax. Passed to hit only 1% of all Americans in 1969, the AMT wasn't indexed for inflation at the time and neither was Bill Clinton's AMT rate increase in 1993. The number of families hit by this shadow tax more than tripled over the next decade. Today, families with incomes as low as $75,000 a year can be hit by the AMT unless Congress passes an annual "patch."

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The Pelosi-Obama health tax surcharge will have a similar effect. The tax would begin in 2011 on income above $500,000 for singles and $1 million for joint filers. Assuming a 4% annual inflation rate over the next decade, that $500,000 for an individual tax filer would hit families with the inflation-adjusted equivalent of an income of about $335,000 by 2020. After 20 years without indexing, the surcharge threshold would be roughly $250,000.
And by the way, this surcharge has also been sneakily written to apply to modified adjusted gross income, which means it applies to both capital gains and dividends that are taxed at lower rates. So the capital gains tax rate that is now 15% would increase in 2011 to 25.4% with the surcharge and repeal of the Bush tax rates. The tax rate on dividends would rise to 45% from 15% (5.4% plus the pre-Bush rate of 39.6%).

This entire area needs review !

As for the business payroll penalty, it is imposed on a sliding scale beginning at a 2% rate for firms with payrolls of $500,000 and rising to 8% on firms with payrolls above $750,000. But those amounts are also not indexed for inflation, so again assuming a 4% average inflation rate in 10 years this range would hit payrolls between $335,000 and $510,000 in today's dollars. Note that in pitching this "pay or play" tax today, Democrats claim that most small businesses would be exempt. But because it isn't indexed, this tax will whack more and more businesses every year. The sales pitch is pure deception.

As for the Senate, instead of the 5.4% surcharge, the Finance Committee bill raises taxes on "high-cost" health care plans. But this too uses the inflation ruse. The Senate bill indexes its tax proposal for the inflation rate plus one percentage point. But that is only about half as high as the rate of overall health-care inflation, i.e., the rate of increase in health-care premiums. So the Joint Tax Committee has found that a Senate tax that starts in 2013 by hitting 13.8 million Americans will hit 39.1 million by 2019.

The return of the inflation tax demonstrates once again the stealth radicalism that animates ObamaCare. In the case of inflation indexing, Democrats would repeal a 30-year bipartisan consensus that it is unfair to tax unreal gains in income, thus hitting millions of middle-class Americans over time with tax rates advertised as only hitting "the rich." Oh, and the House vote on this exercise in dishonest government will come as early as Saturday.

Health-Care Bill Doesn't Index for Inflation; Hits Young and Rising Middle Class Hard - WSJ.com

The goverrnment expenses rise with inflation just as do the citizens.If the value of the doilar shrinks how to we fuel the engine that provides the services such as defense and a host of others unless we keep that income at its required level ?