Wednesday, March 24, 2010

Another hidden healthcare tax

Hidden among healthcare reform is yet another new tax.

Health care reform has a 3.8% solution that some worry could have unhealthy side effects on financial markets.

The legislation, separate from the bill President Obama signed Tuesday and still awaiting Senate approval, has a 3.8% Medicare tax levied against high-income taxpayers' investment income. The fear is that the stock and bond markets could be disrupted as wealthy investors jockey portfolios to manage the tax. "It's a big hike," says Gregg Wind, of accounting firm Wind & Stern in Los Angeles. "It's really wild."

Single taxpayers who earn more than $200,000 and married taxpayers with combined income of more than $250,000 would face the new tax on their investment gains starting in 2013, says Mark Nash of PricewaterhouseCoopers.

The tax would be applied to investment income including interest, dividends, rents, royalties, annuities and capital gains, he says. It would not apply to distributions from retirement plans, he says.

And, it isn't indexed for inflation. In an era of multi trillion dollar deficits and looming inflation, cops and fire fighters will soon be earning $200,000.

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