“All this talk about rules, we make ‘em up as we go along”
-Rep. Alcee Hastings (D-Fla.) Member – House Rules Committee
March 20, 2010
Last night the House passed the massive health care reform legislation, including the Senate Bill (HR 3590) and the House Reconciliation “Fix It” Bill (HR 4872).
The Reconciliation Bill includes a 3.8% Medicare tax on investment income, including interest, dividends, capital gains, rental income, annuities, royalties and so-called “passive income”.
The tax, starting in 2013, would apply to single filers earning more than $200,000 and joint filers earning more than $250,000.
Both the House and Senate bills also increase the Medicare tax on wages from 1.45% to 2.35% for the same “high income” households.
So how will overall tax rates look after health care reform?
Well, the top income tax rate is already scheduled to increase to 39.6% next year.
That means the top rate on investment income would increase from the current 35% to 43.4% once the Medicare tax increase takes effect. That’s a 24% increase over the current rate.
The capital gain tax rate is scheduled to increase to 20% next year. That means the top rate on capital gains would increase from the current 15% to 23.8% once the Medicare tax increase takes effect. That’s a 58 % increase over the current capital gain rate.
Top wage earners will see their combined income tax/Medicare tax increase to 41.95%, a 15% increase over current rates.
We’ll have much more in the coming days and weeks as details emerge.
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