Friends have warned me about the new Medicare tax, 3.8% of one’s investment income. Since the tax only applies to people with higher incomes than mine, I am regrettably not liable for this tax. But what is the economic reason for putting an extra tax only on the investment income of the very well-off?
All Americans are eligible for Medicare at 65 (an age minimum that should be raised). Why should somebody with $100,000 in investment income but no earnings pay no Medicare tax, while someone who earns $100,000 from a job pays $1,450 herself, and $1,450 through her employer to finance Medicare? This seems inequitable. The tax on all investment income, regardless of one’s total income, should be the same as what one pays on self-employment income — 2.9%.