New health care tax costs to high income earners

Posted on August 15, 2009 by Bill Faiferlick

A recent article The ‘new’ tax on the rich by Jeanne Sahadi from CNN Money is sure to raise more concern about where the increased taxation on the so called wealthy is ever going to end.

As Congress continues to grapple with how to pay for health care reform, taxing the wealthy is still in play. Just how wealthy is the next question.

Business owners, professionals and affluent individuals can take advantage of opportunities to reduce their taxable income by implementing owner and professional benefit pension plans which in some cases would dramatically alter the amount if any surtax that they would be responsible for while at the same time providing them with increased capital for future use.

The lead House bill has called for an additional tax to be imposed on income above $280,000 for singles and $350,000 for married couples. The so-called surtax would run as high as 5.4% on income over $1 million. House Speaker Nancy Pelosi, D-Calif., began pushing for the surtax to apply only to singles making more than $500,000 and couples making more than $1 million.

The original proposal would affect 1.2% of Americans, according to the JCT. If the income thresholds were increased, the surtax likely would affect a smallerpercentage of people. Data from the Tax Policy Center suggest that by 2011, fewer than 450,000 households could be subject to the surtax if the thresholds are raised.

As I have discussed previously high income earners are easy targets despite the fact that many so called “wealthy Americans” in many areas of the country are not in fact wealthy. It is easier for the government to tax high income earners than to raise income for lower income earners so they pay proportional taxes and are no longer disenfranchised.

The definition of wealthy is forever changing and fluctuating. What has seemingly escaped every politician in Washington is that in California the richest 1% are responsible for 50% of all revenue the state of California collects. Given that California has a population of approximately 37 million and not all of them are taxpayers, this is a very small number relatively speaking. And now that will increase if Washington has its way. At the national level, the top 30% of tax payers are responsible for 70% of all taxes collected.

Business owners and professionals have ways of circumnavigating this additional tax burden while simultaneously increasing their wealth because if you don’t look after yourself clearly no one else will.