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‘Medicare Tax’ Now to be Called ‘Unearned Income Medicare Contribution’

Under the health care reconciliation proposal, individuals with earnings over $200,000 and couples with earnings over $250,000 will have to fork over 3.8 percent of their capital gains. But the bill isn't calling this a tax.

 The payroll tax increase that was formerly known as "Medicare tax" in both President Obama’s health care reform reconciliation proposal and the original House reconciliation bill is NOT A TAX. Repeat: NOT A TAX.

Sure, individuals with earnings over $200,000 and couples with earnings over $250,000 will have to fork over 3.8 percent of their capital gains (which were not formerly subject to Medicare taxes) to Medicare, in addition to .9 percent more of their earned income.

But among the 15 pages of changes to the Reconciliation Act included in the manager’s amendment released over the weekend was a wee name change: references to ‘Medicare tax’ were deleted, and replaced with the much gentler, and voluntary-sounding, ‘unearned income Medicare contribution.’

We called Speaker Nancy Pelosi’s office for more insight, and will pass along anything we hear back.

For a look at all the changes that the reconciliation bill would make in the health care reform law, check out our side-by-side comparison.

All forms of unearned income should be taxed at the same progressive rates as wages and salaries including capital gains, dividends and inheritance income.

This article is part of an ongoing investigation:
Eye on Health Care Reform

Eye on Health Care Reform

The effort to reform health care stands to affect different people in many different ways.

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