From The New York Times
For more than a year, politicians have been fighting over whether to raise taxes
on high-income people. They rarely mention that affluent Americans will soon be
hit with new taxes adopted as part of the 2010 health
The new levies, which take effect in January, include
an increase in the payroll
on wages and a tax on investment income, including interest, dividends
and capital gains. The Obama administration proposed rules to enforce both last
Affluent people are much more likely than low-income
people to have health
, and now they will, in effect, help pay for coverage for many
lower-income families. Among the most affluent fifth of households, those
affected will see tax increases averaging $6,000 next year, economists estimate.
To help finance Medicare
employees and employers each now pay a hospital insurance
tax equal to 1.45 percent on all wages. Starting in January, the health care law
will require workers to pay an additional tax equal to 0.9 percent of any wages
over $200,000 for single taxpayers and $250,000 for married couples filing
The new taxes on wages and investment income are
expected to raise $318 billion over 10 years, or about half of all the new
revenue collected under the health care law.
Since the creation of Social
in the 1930s, payroll taxes have been levied on the wages of each
worker as an individual. The new Medicare payroll is different. It will be
imposed on the combined earnings of a married couple.
The new 3.8 percent tax applies to the net investment income of certain
high-income taxpayers, those with modified adjusted gross incomes above $200,000
for single taxpayers and $250,000 for couples filing jointly.
The new tax on unearned income would come on top of
other tax increases that might occur automatically next year if President
and Congress cannot reach an agreement in talks on the federal deficit
and debt. If Congress does nothing, the tax rate on long-term capital gains, now
15 percent, will rise to 20 percent in January. Dividends will be treated as
ordinary income and taxed at a maximum rate of 39.6 percent, up from the current
15 percent rate for most dividends.
Under another provision of the health care law,
consumers may find it more difficult to obtain a tax break for medical expenses.
Taxpayers now can take an itemized deduction for
unreimbursed medical expenses, to the extent that they exceed 7.5 percent of
adjusted gross income. The health care law will increase the threshold for most
taxpayers to 10 percent next year. The increase is delayed to 2017 for people 65
In addition, workers face a new $2,500 limit on the
amount they can contribute to flexible spending accounts used to pay medical
expenses. Such accounts can benefit workers by allowing them to pay
out-of-pocket expenses with pretax money.
Taken together, this provision and the change in the
medical expense deduction are expected to raise more than $40 billion of revenue
over 10 years.