Before Messing with Medicare Tax System, Think For a Second
November 13, 2009
There are news reports suggesting that Senate Majority Leader Harry Reid’s main financing mechanism for his health care proposal will be an increase in Medicare taxes. The news reports vary on what the tax hike would look like, but some news reports suggest that the proposal could change the existing Medicare system in two ways: (1) it would no longer be an “individual-level” tax and instead marital status would determine tax liability, and (2) it would tax income sources beyond wages.
The problem with this type of proposal is that we already have such a tax system. It’s called the federal individual income tax. The federal income tax taxes more than just wages, and it takes into account the marital status of the taxpayer.
Reforming the Medicare tax to include more than wages and to take into account marital status is an unnecessary complication, even if you favor a tax increase on high-income people. Just do it as part of the individual income tax.