The problem with wealth reistribution is that it rewards poor planning and punishes discipline. Not in all cases, but in too many. President Obama stated that wealth redistribution was among his goals when he was running for President, and that really concerned me. I am a saver and have managed to build a small nestegg for my retirement. That nestegg took a major hit in the mid-90s when the dot com bubble burst. It took another hit last year with the housing bubble. I understand that their is risk with saving and investing and invest with a long-term strategy that should withstand economic burps like the last two. But new taxes on my life savings just isn't fair. Just because I saved when everyone else was spending, why do I have to pay even more?
What I am getting at is the new taxes in the Health Care Bill.
What? You thought it was actually free? Ha! Dream on. Nothing in life is free. So how do we fix the problem of paying for a trillion dollar social program? One that will certainly have cost over-runs like every other government project? We raise taxes or print more money. The former punishes discipline, the latter creates inflation. So there are no easy answers. Cost reduction would have been a nice place to start this discussion, but since Congress wanted to ram this Bill through without bi-partisan debate, not only do we not have true cost reduction...we also have an unstomachable amount of pork projects and new bureacracy (17,000 new IRS agents? Are you kidding me?)
So what is the cost?
This stuff really isn't clear, but it may only apply to families who make over 250,000 per year. Unfortunately, that does not apply to me yet. I hope by the time I retire that it does. But as a realist, I understand that the tax brackets will be adjusted downwards as the system experiences unprecedented shortfalls, which is bound to happen. Even with the current numbers, the legislation is unclear how it will apply to your 401K when you withdraw the funds.
What the heck am I talking about?
Retroactive taxes! Those making over 250,000 (200,000 for individuals) will be assessed an additional penalty of 3.8 percent on their medicaire taxes to help fund this program. That tax will initially affect five million Americans. However, it will also apply to interest earned on your meager investments AND your 401K. So if, like myself, you have been saving for a lifetime to retire comfortably...the government will unilaterally come in and retroactively take money from you. I am not sure if my reading is correct...but if you hit that 250K ceiling before you withdraw your money, does that mean you will pay the 3.8 percent penalty? It is clear as mud to me...but patently unfair for ANYONE to pay that penalty. A penalty for living frugally and thinking toward your future. The government doesn't want us to do that...they want us to rely on THEM for everything.
Interest taxes are also going to go up. I am not in the top bracket but hope to be eventually. I am not entirely far off. The top bracket for interest is going to rise to a whopping 44 percent! What? Is this America still? I don't make much in the way of interest. Most of my money goes into my 401k. But I do have some modest investments that are going to be pillaged by the government in the name of equitable money redistribution. What is fair about that? That I get to save money for years and build up to a point where I finally start making a little scratch on my investments...and now the government is going to skim nearly half off the top? I am not Daddy Warbucks. Why have I saved all these years just so the government can take half my interest earnings and give them to someone else?
I don't get dividends and don't have anything to sell. I intend to remain in my home, but would certainly be depressed by the five percent increase in the capital gains tax if I had to sell my home.
That's not all?
No way, Jose. If you are lucky enough to scrape into that 200-250K range (which will be lowered...you can say you read it here first...I haven't been wrong on this stuff yet) you also get to increase your deduction to Medicare to go up one percent to 2.35.
Use taxes, too?
Oh yeah. I don't tan...so all you good-looking phony tan folks get to pay that one. Ten percent on each visit. Have fun paying that one. It doesn't sound very fair...but who am I to say. I just pay taxes. If the theory comes from a concept that tanning exposes one to UVB rays and could cause skin cancer then why aren't we taxing people for standing in the sun in warm places like Florida and Hawaii? I think that they should pay their fair share for contributing to skin cancer.
WHAT SCARES MEabout this tax is that is legislates BEHAVIOR. Oh, yes. This bill is a major power grab by the government and can be used in the future (under this precendent) to dictate how you live. Twinkies and carbonated drinks are next. But what about the correlation between steak and colon cancer or meat and gout? What about cholesterol and salt and the realtionships to blood pressure and heart disease? Not a very welcome thought on my part. But hey! We voted for a Socialist, what do you expect? Yes, I said Socialist. And this is not about name-calling or fear-mongering. The man said he wants to redistribute wealth...AND he's doing it! THAT is Socialism, not name calling. At least he and Pelosi should have the integrity to call themselves what they are...Socialists.
But I am not done yet. You know the Iphone commercials...there's an APP for that. Well I have a new one for you...there's a tax for that. Grandma needs a wheelchair? Theres a tax for that. Dad needs a new hip? There's a tax for that. Baby needs a breathing monitor? There's a tax for that. All medical devices get a 2.3 percent tax. And you thought health care was gonna be free. Tsk tsk.
AND I'M STILL NOT DONE! I do not participate in the Medical Savings Account program and am probably missing a nice tax shelter. But I have enough trouble filing my taxes without keeping up with more book-keeping. But for those that DO participate...stand by. They are adding caps to the program and a twenty percent tax penalty for using the money outside the guidelines. Oh yeah, guidelines...because there are new restrictions on what you can spend that money on. And it is capped at 2,500 dollars, which is below average for a family of four. Heck, you spend that on the insurance coverage in a year. I wonder if that is still covered?
Congress never met a tax they didn't like. With double counting on the Medicare savings (that 500 Billion dollars that is magically going to extend Medicare solvency while also closing the "donut hole' and other expenditures that defy the logic accounting)...we are bound to experience even more taxes. The thresholds are going to be lowered and the numbers are going to increase. It is simple economics...you don't have to be a rocket scientist to figure that one out.
And I am STILL NOT DONE. Yes...I am not done. My State is with-holding nearly two thousand dollars in tax returns because of a budget shortfall. What? I overpaid and now they are taking a free loan from me? I wonder what would happen to me if we reversed roles? I know...its called JAIL. They suggest altering your deductions so it won't happen again (but if I do that, I will owe the IRS substantially at the end of the year). Hey, I have a novel idea...how about BALANCING THE BUDGET. How about punishing cheats and rewarding those who do right and pay their taxes?
Why do I raise this issue. Because of a thing called unfunded mandates. That's right. The costs that the government is going to conveniently pass on to the States. If my state can't balance the budget now, what are they going to do with a flood of new unfunded mandates? Raise taxes. That's what they always do. Hell, my state raised the sales tax one percent last year and STILL came up so short that they refuse to give me back my hard earned money. Expect a wave of new state taxes as another consequence of this ill-conceived legislation.
And now I am done. Exhausted at the thought of how many ways the government is going to separate me from my money. Some will go to hard working Americans who have fallen on hard times. I don't begrudge them that and wish that health care were more affordable...a challenge Congress could have undertaken instead of this terrible legislation. Some will be pissed away on even more beauracracy. Some will go to people who live beyond their means and then expect the government to bail them out. Welcome to Socialism. I hope you enjoy your visit. In the meantime...is there anyway to return to sanity before we bankrupt our currency?
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