"Urban legends" come up in many spheres of life, including politics. Unfortunately, several urban legends have cropped up recently in relation to the two-dozen new or higher taxes in Obamacare. Sometimes, these urban legends are attributed to Americans for Tax Reform. There's no need to make up new tax hikes--the dozens of them in Obamacare are quite enough. This posting is to set the record straight on two urban legends we've seen a lot:
- "There's a new 3.8 percent Medicare surtax on home sales." This refers to a new, 3.8 percent surtax on investment slated to begin in 2013. This will be assessed on taxable capital gains, dividends, interest, etc. in households making more than $250,000 per year.
The reason this urban legend is misleading is because most home sales are excluded from capital gains taxation. If a married couple has owned and lived in their primary residence for at least 24 of the 60 months prior to sale, they can typically exclude up to $500,000 in capital gains from taxation.
Certainly some home sales will face this surtax, but it's not every home sold by any stretch. It will in fact be a small fraction of all homes sold.
- "All workers will have to pay taxes on their employer-provided health insurance benefits." This springs from an Obamacare provision which requires employers in 2011 (recently moved to 2012) to report the value of employer-provided health care on employee W-2 forms.
There's no doubt that this is a setup for a future tax hike down the road. But it's inaccurate to call this a tax hike in and of itself. As it is, it's merely information reporting, and the JCT associated no higher tax revenues with it.