At the secret White House conference committee last month to put the finishing touches on ObamaCare, just days before Scott Brown was elected, one of the proposals reportedly being considered was “boosting the Medicare payroll tax — either by increasing the rate or extending it to unearned income.” The ObamaCare proposal released yesterday by the White House does both.
The proposal would increase the tax rate by 30 percent, from 2.9 percent to 3.8 percent, for “high-income households” (defined as those making $250,000 or more, or individuals making $200,000), and extend the tax to their investment income, while not taxing the investment income of others.
The stated rationale is “fairness” — which has become the all-purpose Obama justification for increased taxes. He used it for his disingenuous proposal to raise tax rates to 39.6 percent while limiting deductions to 28 percent; before that he argued fairness requires that capital-gains taxes be increased even while admitting experience shows lower rates produce more revenue overall.
Obama’s Medicare tax proposal is a particularly egregious form of false advertising, because the Medicare tax is not really a tax relating to Medicare. It no longer relates to the Medicare benefits of those who pay it, and the expanded and increased tax would be used not for Medicare but rather to finance legislation that will dramatically reduce Medicare benefits while funding a new entitlement for others.
The tax proposal would require extensive hearings to properly evaluate its revenue and policy aspects. It contemplates a huge transfer of funds from the private sector to the federal government to be spent or redistributed for purposes other than Medicare. It would complete the transformation of the Medicare tax into an add-on income tax that, together with the existing income rates and the even higher ones Obama plans by letting the current rates “expire” at the end of this year, will push the combined state and federal tax up to 50 percent or more.
But the proposal will not be subjected to the scrutiny of a hearing. It will serve instead as a prop for Obama’s televised political theater on Thursday, when he will come out in favor of “fairness.”