Writing on the Corner yesterday, Ramesh rightly highlighted the unfairness of taxing nominal rather than real capital gains.
Paying for Obamacare is going to make this worse, not better. Writing in the Washington Examiner Sally Pipes explains:
Also in 2013, individuals and families earning more than $200,000 and $250,000, respectively, will face a new 3.8 percent Medicare tax on “unearned” income, such as interest, capital gains, annuities, royalties, rents and dividends. This new Medicare tax is estimated to enrich the government by $210 billion from 2013 to 2019.
It’s supposed to be a tax on the rich, but a lot of not-so-wealthy Americans will end up paying it as well, because many will eventually sell a home. Under Obamacare, if the profit earned on any home sale exceeds the capital gains exemption of $250,000 for an individual or $500,000 for a family, the excess amount will be subject to the new Medicare tax, in addition to capital gains taxes.
Unfortunately, this will amount to a new tax on retirement savings because so many Americans rely on the long-term appreciation of their homes to help fund their nest eggs.
Even worse, none of these taxes is indexed to inflation. So as incomes rise — as they invariably do over time — more and more people will be subjected to these so-called taxes on the wealthy.
The government’s war on savers continues, it seems, unabated.