The New Health Tax

Taxes are on the rise to cover your health care bill. At least that is the proposed method of paying for the new health care proposals. Congress wants to levy a 5.4% income tax on individuals making over $500,000 a year and couples over $1,000,000. This would raise the effective tax rate on these individuals by nearly 12.5% (a 32% increase) when you factor in other changes Obama wants to make. There are many reasons why taxing the heck out of the wealth is unhealthy for the economy, but this new health care tax has a much more glaring problem. It is not indexed to inflation. This means that each year as inflation slowly erodes the value of the dollar more Americans will be hit with this tax at ever lower income levels in today's dollars. This is not the first tax to suffer this fate - remember the AMT or Alternative Minimum Tax.

Eventually this new health care tax will begin to fall on middle-class Americans as inflation lifts incomes in dollar value but without adding buying power. This will end up being another thing Congress has to "fix" every year before tax time. It seems to me that given our experience with the AMT this is just a covert way to raise taxes year after year.