Get Ready for the New Investment Tax

[MachineGhost]

Until this week, investors were waiting to see what the Supreme Court would do about the 3.8 percentage-point surtax on investment income, part of President Obama's health-care overhaul. The Internal Revenue Service hasn't yet released guidance on the new tax.

http://online.wsj.com/article/SB1000142 ... 17316.html

[Lone Wolf]

Thanks, good article about an unpleasant subject.  Obamacare's tax treatment on sales of a primary residence was completely new to me.

[clacy]

I've heard many talking heads refer to this as a "wind fall profits tax", so I guess if you just repeat these catch phrases enough the average citizen who this tax doesn't apply to will be fine with it.

[TripleB]

In 10 to 20 years, the median income for US tax payers will be $250k due to inflation, and since this new tax isn't pegged to inflation, almost everyone will be paying it. Enjoy!

[Pointedstick]

In 10 to 20 years, the median income for US tax payers will be $250k due to inflation, and since this new tax isn't pegged to inflation, almost everyone will be paying it. Enjoy!

The likelier outcome is that Congress will instead have bitterly contested party-line votes to raise the threshold every single year with a rider to another law, thus making another nasty, polarizing fight a yearly occurrence. Same as the AMT and the Bush tax cuts.

[MediumTex]

In 10 to 20 years, the median income for US tax payers will be $250k due to inflation, and since this new tax isn't pegged to inflation, almost everyone will be paying it. Enjoy!

The likelier outcome is that Congress will instead have bitterly contested party-line votes to raise the threshold every single year with a rider to another law, thus making another nasty, polarizing fight a yearly occurrence. Same as the AMT and the Bush tax cuts.

I remember back in 2001 when EGTRRA was passed thinking to myself that the sunset provisions seemed like a cheap political stunt.  I wondered what would happen when they expired.  I guess we are seeing how that process works now.

[AgAuMoney]

In 10 to 20 years, the median income for US tax payers will be $250k due to inflation, and since this new tax isn't pegged to inflation, almost everyone will be paying it. Enjoy!

The likelier outcome is that Congress will instead have bitterly contested party-line votes to raise the threshold every single year with a rider to another law

If history holds, the threshold will cause bitterly contested votes, but the raises will not quite keep up with inflation.

When the current income tax was instituted, a very low percentage of people made enough income to be subject to the tax.  Gradually over the decades more and more people 'grew' into the system until now even children too young to vote can easily earn enough at menial summer jobs to end up paying taxes.  The change has been gradual enough that there was never enough popular sentiment to strike it down, and to keep everyone thinking "this is normal."

It's an effective strategy, intentional or unintentional.

First they came for the communists, and I didn't speak out because I wasn't a communist. Then they came for the trade unionists, and I didn't speak out because I wasn't a trade unionist. Then they came for the Jews, and I didn't speak out because I wasn't a Jew. Then they came for me and there was no one left to speak out for me.

[AgAuMoney]

I remember back in 2001 when EGTRRA was passed thinking to myself that the sunset provisions seemed like a cheap political stunt.  I wondered what would happen when they expired.  I guess we are seeing how that process works now.

Yup.

I'd like to see every act of congress face a mandatory sunset no later than 6 years from its date of passage.

[foglifter]

To anyone with at least high school level of math it should be obvious that the formula for any tax or benefit rule that takes absolute income as one of the variables should include some sort of COLA... Since we have so many examples when absolute income figures are engraved in the legislation I can't help concluding that the goal is to get more people taxed as time goes by. Another side effect is more job (and visibility) for Congress in election years, and more opportunity for political battles.

Although maybe we just need more engineering and less political science and English majors in Congress. 

[clacy]

To anyone with at least high school level of math it should be obvious that the formula for any tax or benefit rule that takes absolute income as one of the variables should include some sort of COLA... Since we have so many examples when absolute income figures are engraved in the legislation I can't help concluding that the goal is to get more people taxed as time goes by. Another side effect is more job (and visibility) for Congress in election years, and more opportunity for political battles.

Although maybe we just need more engineering and less political science and English majors in Congress. 

Having no COLA increases to tax rates is a win/win for both parties.  It means more and more people are taxed as time goes on, so the Dems love it.  It also allows the Republicans to raise tax issues as an issue for elections (good thing for them) because they are arguing for extending tax cuts, etc.