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  • Families and Small Businesses to be Taxed to Pay for Health Reform

    To help pay for its expensive and painfully complex health care bill, Congress plans on burdening families and small businesses earning over $350,000 with a surtax. Ill-conceived “soak the rich” plans devised by Congress tend to inspire a yawn, a sigh, or applause from the vast majority of citizens who don’t have to actually pay the lopsided amount of taxes that the “rich” pay. Well, as it turns out, more and more of us might actually be “rich” enough to have to chip in to help fund government-run health insurance for the masses.

    The surtax proposed by Rep. Charlie Rangel (D-NY) would stand independent of the income taxes Americans are already paying. Generally, a surtax is added onto an individual or business’s taxable income. However, in a maneuver to include more tax-filers into Congress’s double-tax treasure chest (or triple-tax if you invest in anything), Congress has decided to make the surtax applicable to your adjusted gross income, or AGI. Your AGI is what your income looks like before you take out deductions like state and local taxes, medical expenses, and mortgage interest payments. So it’s a higher number than your taxable income.

    How much higher? American tax-filers reported over $8 trillion in Adjusted Gross Income in 2006, yet they were only taxed on less than $5.5 trillion of it. The difference between those two numbers might be able to pay for the current health care plan twice! Only 68% of the adjusted gross income of U.S. taxpayers was actually taxable in 2006, yet the current proposed health care bill wants to change the rules and start taxing even more money to help “control” health care costs.

    So how does this surtax work? The government would take 1-5.4% from those families and small businesses with an AGI greater than $350,000 ($280,000 if you’re a single filer). Let’s say you’re a small business owner in Baltimore, Maryland with an AGI of $1,100,000, the amount listed in box #37 of your IRS 1040 form. Under this plan you will be taxed 5.4% on that $1,100,000, which comes to a bit more than $59,000. However, when calculating your income tax liability, the government provides you the option of applying a multitude of itemized deductions, found on a Schedule A Form. The total of your deductions can then be filled in on the second page of your 1040. So if you’re paying a 5.5% Maryland State tax, a 3.05% local tax, $5,000 in mortgage interest payments, and another $3,000 in medical expenses, those deductions would help lower the amount you’re liable for by way of income tax, but wouldn’t put a dent in your surtax contribution. In fact, the small business owner would pay approximately $15,000 if the surtax applied to his taxable income, but because it applies to his AGI, he or she has to pay more than $59,000. That’s more than a $44,000 difference! That $44,000 might force the business owner to cut costs somewhere, and that could mean somebody’s out of a job.

    And if that’s not enough to cast doubt on the proposed tax hike, the surtax may actually increase in 2013. If the President and Congress are intent on saving or creating jobs, and allowing small businesses to compete on a level playing field, this surtax doesn’t match the rhetoric.

    Posted in Obamacare [slideshow_deploy]

    18 Responses to Families and Small Businesses to be Taxed to Pay for Health Reform

    1. Randall L. Brookshir says:

      This article could be improved by calculating this Baltimore Buisness man's total tax dues. $44,000 dollars out of a million doesn't sound like that much. Add that number to what he already owed before the tax hike and you'll have a much uglier number.

    2. David, Medon says:

      The Obama administration has a puzzling agenda. It touts that economic revival and job creation are its goals, but the tactics used to gain that result bear credence doubts. It is obvious that the Democrat party wants to push this nation into a more socialistic form of governing and society. But to have socialism succeed, it is imperative to retain a large portion of capitalism to support and finance its existence. The administration is not following this guideline for the success of its new government since the policies presented so far have only damaged the economy and killed large portions of capitalism. The only way government can stimulate business is to stay out of it. Obama's policies are, the bold attempts of someone using this country as a guinea pig to see if these ideas will work, or, are carefully designed steps to relinquish the private sector's power in order to have a government-run national workforce. If our people have their healthcare, financial institutions, jobs and income controlled by government, then that government, by definition, is Communism. If the Constitution is supposed to protect us against an abusive government, then it is time to start using the Constitution instead of just admiring it on the wall or reading about it in history books.

    3. Jim says:

      HEY OBAMA, PELOSI, REID AND THE REST OF YOU CLOWNS

      IN WASHINGTON…….PLEASE DON'T IGNORE YOUR COUNTRY…..WE'RE NOT HAPPY WITH ANY OF YOU…..AND HOPE TO FIRE YOU ALL !!!

    4. DON WOJTASZEK- LOUIS says:

      The Democratic Party has proven itself to be just what it has always been considered,a "TAX and SPEND " organization of fools out for themselves and the heck with the country!

    5. Sam A. Giunta, CPA - says:

      The only positive statement I can make of the Heritage Foundation is that I appreciated the copy of the constitution it offered. Otherwise, I cannot see that it has provided any positive, reasonable, workable solutions to the issues facing our country. The attitude constantly expressed by the Foundation and its "I got mine supporters" is TO HELL WITH EVERYBODY ELSE; we got ours let them get theirs. It would be extremely interesting to know how many of the Foundation's supporters did in fact "earn" what they have. I will wager a dollar to a donut that 99% of them received in some meaningful measure financial legacies, government pensions, and ill-gotten gains from manipulated investments. Tell me "it ain't true". I would encourage the Foundation to help solve our problems and discontinue tearing down our current president. Where was your criticism of the clown who was president during the last eight years? He demeaned the presidency; led us into a globally threatening war, gathered a group of mostly buffoons as his advisors and lied to the American public. Billions for war but not for the unfortunate or for the health of our people. I invite your cogent response.

    6. Sam A. Giunta, CPA - says:

      Be my guest.

    7. DANIEL CABRERA, MERR says:

      BESIDE THE ECONOMICAL BURDEN….WHAT ELSE THIS SO CALLED HEALTH PLAN OFFERS?

      ABORTION,EUTHANASIA,GENOCIDE___'HEALTH PLAN'….WHAT KIND OF PLAN ?…(something hidden?)

      If interested, anyone can go into READ, RESEARCH, INVESTIGATE, AND – 'read between' the lines'….and ultimtely ANALYZE, in multiangular way, this monstruosity of proposal…..you may find that the so called 'reform' vectorize promotional roads to ABORTION, EUTHANASIA, AND GENOCIDE. Strange right ?

      The final result is but one thing, VIRTUAL STERILIZATION ON POPULATION.

      But I will go even further, although the chanted 'socialized medicine' in other countries are in place not doing a great job,….is in here where to set the 'global basis' for a total ELIMINATION OF HUMAN RACE….and which would be the best pivotal starting point to do at great scale this ?,… once the circle is completed HERE the best coutry in the planet ?

      Ah,….too far fetch?,…..too science fiction? (like aliens have a program of relatively slow program to erase humans from this planet ?).

      Of course, is too speculative, but you know what?… if we do not think the unthinkable, that 'unthinkable' will come to be. Yes, and now – for as much we can see – here now the unthinkable is taking place systematicaly at local level…THE DESTRUCTION OF OUR COUNTRY BY THE OBAMA GANG ANTI-CONSTITUTIONAL, ANTIAMERICAN,CORRUPTED ORGANIZATION.

      And how your day is going so far ?

      Wishing everyone good thinking,

      Daniel Cabrera

      Merrillville,Indiana

    8. Pingback: A few Sunday links - Maggie's Farm

    9. Rayaboy says:

      If anyone is interested in this healthcare debate, I just read a great online book. It discusses the myths that politicians use to defend a government run health plan. It then debunks those myths with researched facts, and finally gives a plan to actually reduce costs using free market principles. here is the link:

      http://origin.ih.constantcontact.com/fs073/110223

    10. Pingback: Sunday, August 2, 2009 — ExposeTheMedia.com

    11. Ray Feffer, Brooklyn says:

      Articles like this one, which take a critical (and finally honest) look at the practical implications of health care reform, are extremely important. The author here makes an informative and novel argument against the surtax, or at the very least, translates abstract figures into real dollars and cents. Sadly, what amounts to a novel argument is actually a careful reading of the operative consequences of the surtax; this is the very reason it is important to do more than quickly glance over specs without paying attention to the details. If we all took as much care as the author to not only think about and debate issues, but actually gain a pragmatic understanding of the issues, better policy would be forged.

    12. Todd says:

      To our friend in Tampa,

      I believe you are buying in to the false dichotomy commonly propagated by liberals where you are either for more government control and give-aways, or a heartless elitist.

      Unfortunately, the federal government has so perversely manipulated the constitution that the checks and balances of a responsible and informed citizenry have been clouded.

      In reading your copy of the constitution, I would encourage you to find one single reason why the federal government should be doing anything to "advance" healthcare, or as it commonly does: subsidize poor decisions.

      I’ve kept this brief and lacking in details, but I encourage you to investigate constitutional history before devising opportunities for intervention by the federal government. You may also find it beneficial to research the Bible to gain some insight on the phenomenon of tithing whereby individuals actually voluntarily choose to provide funding to organizations that have a proven track record of providing relief for the ills of society.

      P.S. I have earned what I "have" financially, which isn't much. But what I really value was given to me by my creator and the brave men and women that founded our country and continue to fight for our freedom. I will never do enough to earn that.

    13. Mark Caplinger,Virgi says:

      Isn't Obama contradicting himself by saying one thing in 03 and then doing the exact opposite as president?I have a hard time keeping up with his ever-changing stories.

      No middle class tax,then maybe we have too.Most transparent ever,now you couldn't see him if he was standing right in front of you.No more than 8% jobs lost,guess what?

      He is a smooth talking oily slick salesman,people heard his words and BAM they were hooked.And still after all he has lied about there are still people swearing by him.

      I think what bothers me the most is that he has actually stated that our Constitution is out-dated and needs to be re-written.Seems like something our friend in Honduras tried and the people noticed this and acted accordingly.I think because our government(both parties)has for decades slowly taken powers that were not meant for them.They federalized the Bill Of Rights,assuming full control over our lives.It is time we take back what is rightfully ours.

    14. Bobbie Jay says:

      I, myself am not, but I whole heartedly respect the wealthy. The wealthy that came to use their independence and develop their skills to earn the amount of money they do. The wealthy who generously allowed us employment so my family could live FREE from government dependency.

      Any corrupt business in the private sector is found out. Government won't be, until maybe long after. Lots of cover-up in the government!

      The only thing holding my family back, is the over taxation at every government level. Government greed, soon forcing us into government control and dependency.

      I will always fight for the freedom to prosper and for all those on government dependency to gain their freedom of independence…unlike the Obama plan.

      Thank you, to the small business owners and the wealthy. You've kept us FREE! I pray for all. This man continues hypocrisy and deception to the people he leads.

    15. Pingback: » Financial News Update - 08/03/09 NoisyRoom.net: Where liberty dwells, there is my country…

    16. Wyn, Tacoma Wa says:

      I agree with David Medon but I would go further. They are intent on destroying the nation. Why? That I can't understand because as Mr. Medon implies, destroying the economic system means destroying the very tax base they depend on to implement their programs. Everyone loses. My sense is, that this encarnation of Lenin and Stalin have given no thought to unintended consequences. That events tend to spiral out of control. That people do not sit still while their lives are being ripped apart. Much less have they thought of what happens when you suck so much money out of the system, people lose jobs which causes other businesses to lose sales…and so it goes until even the bureaucrats and politicians will not escape what these people started.

    17. Chris, Tampa, Iraq says:

      Hey Sam in Tampa! Yes I believe Bush Lied to us, thank you very much for pointing that out. I also believe he was wrong for bailing out anyone, (no were free to fail as we are to prosper). But is that reason enough to rip up the constitution and let the government conduct the biggest take over on the private sector in our countries history? The government fails at everything they do except keeping its people safe, that's there job. Our country is great because of it's free citizens, not it's government. It is only us who can fix this, each and everyone of us. They need to set us free to do what we do best and back off off our right to life, liberty and the pursuit of happiness. In closing Republican's and Democrats have been getting it wrong, I'm praying for the person who can step in and get it right.

    18. Pingback: Public Support for ObamaCare Collapses under the Facts | Fix Health Care Policy

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