Marketplace Scratch Pad

The "help for health" tax

Scott Jagow Mar 19, 2010

As Congress inches closer to approving a health reform bill, there’s one last-minute addition to the legislation that’s prompting much controversy. It’s a new tax on “unearned income.” What might that be? I’m glad you asked.

Here’s how the legislation describes it:

“[I]ncome from interest, dividends, annuities, royalties, and rents, other than such income which is derived in the ordinary course of a trade or business not described in paragraph (2), ”(ii) other gross income derived from a trade or business described in paragraph (2),” and ”(iii) net gain (to the extent taken into account in computing taxable income) attributable to the disposition of property other than property held in a trade or business not described in paragraph (2).”

So, essentially an additional tax on investments and capital gains. House Speaker Nancy Pelosi was asked the question:

Reporter: So, capital gains?

Pelosi: “No, unearned income, whatever category that is.”

Pelosi also described the new tax as “help for health,” calling it a “health fee” on all those who have what she again described as “unearned income” that would keep Medicare solvent for years to come.

I get the feeling Pelosi cares not a whit where the money comes from or even knows where the money is coming from, as long as there’s something that’s paying the tab.

The investment tax or “help for health” as Pelosi calls it would apply to any person making $200,00 or more and any couple making $250,000 and up. The Wall Street Journal says:

The White House has embraced this investment tax because Big Labor opposed its preferred excise tax on high-cost health plans (the so-called Cadillac tax). So the White House decided to delay the excise tax, which meant losing $116.2 billion in revenue over the first 10 years. Voila, out came the 2.9% investment tax.

So for reasons of political expediency, Democrats will now impose a destructive tax that will permanently skew the incentives to work, save and create jobs. Come to think of it, that sums up this entire exercise.

Do you think this is the way we should be paying for Medicare? Or is this last-minute addition to the bill a horrible idea?

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.