Senate Bill Mucks Up the Medicare Tax

November 19, 2009

Of all the changes from the Senate Finance Committee bill to the final Senate bill, the most annoying from a tax adminstrator’s perspective must be the complexification of the Medicare tax. Now a simple 2.9% of salary goes to Medicare (1.45% employee portion; 1.45% employer). No matter who the person is or how much he makes. No tax authority has to find out anything about the wage-earner: married or not, kids or not, it doesn’t matter — 2.9%.

In search of more tax revenue, Sen. Reid decided that was too simple to administer. Instead of leaving the ‘Cadillac tax’ to raise the revenue, he bowed to pressure and did even worse by turning to the Medicare tax. Not only will this system that has had one simple rate for decades have a new, higher rate tacked on to the top end. The threshold for paying that top rate will depend on the wages of the couple if the worker is married. Did the senators or their staff not think through how that complicates the administration of the tax? Can we not have one easily adminstrable tax?

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