Tax Lawyer's Blog

The hot topic around the taxosphere the last few weeks is the House’s talk of imposing a special surtax on the rich to help pay for healthcare reform.

I have written about why I think this idea is absurd and why I think it won’t improve the health of Americans.

P.S. It’s already made me sick.

Here is what other tax bloggers think of the class warfare tax.

1. Joe Kristan of Tax Updates has chimed in on the silliness of the House’s proposed surtax on the rich:

The surtax means pass-through businesses that account for 60% of small business profits will be sending more money to the government instead of developing new products, opening new locations, and hiring new employees. Or, more likely, they will be spending money on people like me to change their tax strategies to keep their money from going into the black hole of out-of-control government spending.

Hey, I like that last part.

2. Kay Bell of Don’t Mess With Taxes also wrote about the nefarious money grab:

Some Democratic lawmakers, however aren’t buying the surtax proposed by their own party.

Twenty-one newly elected Representatives and one second-term House member last week sent Speaker Nancy Pelosi a letter opposing healthcare-related tax increases.

The income surtax on the wealthy, argue the Representatives, would place an undue burden on small businesses, some of which pay taxes as individual filers.

Democrats are smart not to like it because no matter how they try to spin it’s a tax increase. And the electorate hates tax increases.

If the surtax becomes law, Republicans will clobber Democrats over the head with it in 2010.

3. Paul Caron of the TaxProf Blog alerts us to a report titled House Democrat: Lawmakers Should Also Pay the Surtax by Martin Vaughan of Dow Jones Newswires: 

House Democratic leaders want to tax the rich to pay for universal health care, but one House Democrat is seeking to have members of Congress chip in out of their own pockets.

Rep. Artur Davis, D-Ala., said he will propose that a 1% surtax be applied to the salaries of members of Congress, regardless of how much they earn. Davis said that would help lawmakers share in the tax that the House bill — which this week cleared two of three House Committees — would impose on families and businesses earning more than $350,000 annually. …

The surtax would place an additional 1% on annual incomes between $350,000 and $500,000, for married couples filing jointly, starting in 2011. Families with incomes between $500,000 and $1 million would see an additional 1.5% tax, while those with incomes of more than $1 million would face a surtax of 5.4%.

4. Kelly Phillips-Erb, the Tax Girl, was one of the first bloggers to write about the surtax nonsense:

When the dust settles, upper class taxpayers or no, the plan calls for raising taxes. House Ways and Means Committee Chairman Charles Rangel tried to soften the blow by explaining that the surtax “causes the least amount of pain on the least amount of people.”

Again, still raising taxes. That worries some Dems in an election year.

It especially worries House Dems since the rumor-mongers suggest that the Senate isn’t planning to offer a sister proposal. It would be a “yes” for higher taxes when the bill has no real chance of going anywhere.

Don’t you just love Congress?

Um, no!

5. Dan Meyer of Tick Marks blog seems ambivalent about the special tax on the successful and productive:

Surtaxes tend to have a short shelf-life; past uses include taxation for the Vietnam War and the “windfall oil profits tax.”

The obvious selling point of Rangel’s proposal is that it takes the apparent burden of healthcare funding off the middle class. Potential disadvantages: extra taxes on the wealthy tend to be passed on to public by higher prices, lower wages, less hiring, etc. and the tax structure (rate points for unmarried taxpayers are at 80% for MFJs) provides some opportunity for Republicans to categorize the surtax as “anti-marriage.”

I agree with Dan that the middle-class burden is only apparent, but I would add that the proposal only apparently removes that apparent burden.

6. Len Burman of the Tax Foundation’s Policy Center’s Tax Vox Blog is in favor of the sur(reptitious) tax (kind of):

The main virtue of the surtax is political.  By taxing a very broad measure of income, the top effective tax rate can be kept lower than it would be if income tax rates were adjusted directly (since tax rates apply to taxable income—AGI minus deductions—which is a significantly smaller base than AGI).  The AGI surtax also applies to capital gains and dividends, which further helps to keep the surtax rate relatively low.

[A] better option would be to broaden the income tax base rather than raise rates. For example, repealing the state and local tax deduction would raise more than enough revenue to finance AMT repeal.  However, Mr. Rangel (D-high tax state) is unlikely to propose that anytime soon.

I would agree with this if I understood it.

In an effort to be fair and balanced I searched and I searched for a tax blogger who has come out unequivocally in favor of the Democrats’ latest effort to soak the rich.

I couldn’t find one, but I am achingly curious to know what Professor James Maule of Mauled Again and Professor Linda Beale of ataxingmatter think about this craziness.

Related Posts:

• Democrats Propose Special Surtax on the “Rich” to be Added to Obama Tax Increases
• Taxing the Rich Because You Can: The Beginning of Totalitarianism

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