The unions cut a special behind-closed-doors deal with the President to delay the tax on Cadillac heath insurance plans until 2018. Though Obama proposes eliminating the Cornhusker kickback, he plans to keep his word to the SEIU on this break.
To compensate for the lost tax revenue, Obama proposes extending Medicare “payroll taxes” to unearned income — i.e. interest, dividends and capital gains.
That’s a 2.9% increase in capital gains taxes.
Keeping in mind that the Bush tax rates expire on Dec 31, the capital gains tax rate will go from 15% to 22.9% — a 52.7% increase !
As the simple example below shows, after-tax gains get crushed — overnight — when the new rates take effect.
Note: Potentially making matters worse, I expect the Medicare tax on unearned income to become effective on the date Obama signs the bill … or worse, I wouldn’t be surprised if Team Obama made the tax hike retroactive to Jan. 1, 2010. The sucking sound you’ll hear is the stock market losing steam …
The Homa Files 
March 9, 2010 at 10:32 am |
There’s an outright war on capital and investors at the moment.
Taxes are one front in the conflict and inflation is the other. Even 3 or 4 years of double digit inflation later this decade would destroy up to a quarter of Boomers’ savings just as they begin retirement.
I’m sure we can squeeze a few billion out of the hopeful Millenials – except the work participation rate for 22-29 is only 63% and almost 15% of them still live with mom and dad – and a bunch of them cheered when the President said they could delay adulthood in terms of health insurance until 27.
March 9, 2010 at 2:08 pm |
Simple wealth redistribution! Nothing along these lines shoul surprsie us…it’s one of the few campagin promises our current Ptresidenbt is VERY likely to honor!
March 10, 2010 at 9:46 am |
Rick, you’re half right – the cap gains tax is wealth redistribution.
Inflation is wealth destruction.