The Health Care Bill Redistributes Income

Yup - nothing fair about it, The Tax Foundation's report shows it to be quite glaring:

Overall, the health care bill increases the amount of income redistribution from high-income families. That is largely due to the bill's targeted Medicare tax hike on those earning more than $200,000 (singles) and $250,000 (couples). The Medicare tax hike would for the first time incorporate filing status into each person's Medicare tax liability, and also for the first time, the Medicare tax will not apply just to wages but also to investment income such as income from capital gains, dividends, interest and rental property. In its first year of application, 2013, the new Medicare tax will hit approximately the top-earning two percent of families. That percentage will grow as the years go by because the income thresholds are not indexed for inflation. On the other hand, we may see a repeat of the annual patch ritual that prevailed for several years for the AMT.

We estimate that the health reform law will take an additional $52,000 on average from the families in the top one percent of the income distribution. That is on top of the redistribution in fiscal year 2016 that was already expected to accrue to that family, which amounts to about $484,000.

Though nominally part of the Medicare tax, extra tax payments will not entitle the payers to any additional Medicare benefit. In fact, Medicare benefits (on net) are being cut in the health care bill. Overall, we estimate that as a result of the health care reform, the top 1 percent would go from earning 14.7 percent of post-redistribution income to around 14.35 percent of post-redistribution income.

This income will be redistributed, not mostly to the lowest income group, but to the lower-middle income groups. The lowest income group gains little because most of the families already receive Medicaid and/or Medicare benefits. Families in those second and third deciles (10^th percentile through 30^th percentile) will see an average increase in their income redistribution of around $2,000.

Redistribute and make dependent...that's the ticket! Read the full report here.