Wednesday, November 18, 2009

Obama Medicare Tax Hike: Why you should care about Medicare Tax Hikes

So you are years away from enrolling in Medicare. So, you make less than $250,000 a year - so...you think hiking the tax rate for Medicare on those earning more than you is a good idea. Wrong.

Medicare Tax Hike

The Heritage Foundation says a new proposal to raise the current Medicare tax on those making $250,000 or more, is under consideration. At the moment, employees and employers each share the Medicare tax burden of 2.9 percent - each paying 1.45 percent. When you retire, Medicare covers your hospitalization.

The Medicare program is already paying out more than it is taking in. So, how will this higher tax on those making $250,000 or more, benefit you? It won't. Here's the scoop from the Heritage Foundation:
Raising the tax and using the revenue to fund a new entitlement does nothing to fix this shortcoming.

Using new revenue from the Medicare tax to fund health care reform would be as illogical as raising the federal gas tax, which sensibly funds highway construction and maintenance, to pay for a new welfare entitlement.

there is little doubt the tax hike would legally fall on those earning more than $250,000 a year so it remains in accordance with President Obama’s campaign pledge.

Nevertheless, those earning much less than $250,000 a year will feel the negative impact of the tax. Higher taxes on high earners will cause them to take fewer risks and cut back on investment. This will lower wages and reduce the number of jobs created. And much of the tax increase is likely to fall on small businesses, which will cause them to create fewer jobs and pay lower wages. Workers earning much less than $250,000 a year will bear the full brunt of these jobs lost and lower wages.
Thank you to OlBroad for graphic

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