The Underlying Assumption of the Leftist Taxers
In a review of some of the tax consequences of Obamacare, Grafton Willey conveys this bit of policy that one suspects underlies many of the assumptions of those who advance policies in the mold of nationalized healthcare:
Imposing a 3.8 percent “unearned-income Medicare contributions” tax on higher-income taxpayers. The 3.8 percent unearned-income Medicare contributions tax is imposed on the lesser of net investment income or the excess of modified adjusted gross income (AGI) over the threshold amount ($200,000 for single individuals or heads of households; $250,000 for married couples filing a joint return and surviving spouses; and $125,000 for married couples filing separate returns).
Neither the $200,000 nor $250,000 amounts are indexed for inflation. Modified AGI is adjusted gross income increased by the amount excluded from income as foreign earned income less deductions attributable to such income.
Net investment income includes interest, dividends, royalties, rents, gain from disposing of property from a passive activity and income earned from a trade or business that is a passive activity. In determining net investment income, investment income is reduced by deductions properly allowed to that income.
Net investment income does not include distributions from qualified retirement plans, including pensions and certain retirement accounts. For example, income from individual retirement accounts (IRAs), 401(a) money purchase plans, 403(b) and 457(b) plans would be exempt.
Some of the hardest work that I’ve ever done was the back-room labor involved in selling fish from a truck, and there were times, while hauling crates in the snow or cleaning putrid wooden boxes in the beating sun, that I marveled that it should be so difficult to earn $7 per hour and wondered what one could possibly do to “earn” the salaries of the wealthy. (For clarity: I look back on those days very fondly and came around to appreciating them even while they were in process.)
I don’t offer that anecdote as a means of transforming economic ignorance into a populist cry. To the contrary: the notion of “earned income” is hopelessly subjective and, therefore, merely a dash of political rhetoric to justify confiscatory taxation. Consider the amount of money that President Obama has earned as an author. Personally, I love writing and undertake it as a compulsion and balm. But in the course of lugging a table saw up the narrow steps to the third floor of a Newport mansion, I might be inclined to challenge the assertion that Mr. Obama “earned” that money in the sense implied by the Medicare tax.