The Senate’s Red Crayon Math

What follows is an excerpt of a staff editorial piece at E21 which concisely shows why congress critters using red crayons should not be charge of anything more critical than changing a light bulb in their own homes during the day.  This takes the phrases “fiat money” and “robbing Peter to pay Paul” to a whole new level as Senate Dems count the magic money twice.

Make sure to go over and read the entire article, as it explains very simply the looming fiscal problems of the Medicare Trust Fund and the Senate’s Borg assimilation of the middle class’ income through inflation via the Medicare Hospital Insurance payroll tax.

The Payroll Tax Increase: A Loophole and Ticking Time Bomb

Senate Democrats propose raising the HI tax rate by 0.5% to 3.4% on wages in excess of $200,000 ($250,000 for joint filers) beginning in 2013.  The Joint Committee on Taxation estimates this tax increase will raise $54 billion over ten years.  Given the scale of the Medicare funding deficit, some might argue that these additional HI revenues are necessary.  But this is not what Democrats propose; this $54 billion would be used to finance entirely new health insurance subsidies for non-Medicare beneficiaries.  The money just gets counted as though it’s deposited in the Medicare Trust Fund because the tax is deducted as part of the FICA line item on a worker’s paycheck.

While the person who devised this scheme has no doubt received hearty congratulations from the rest of the Senate Democratic caucus, the cynicism embedded in this strategy is breathtaking.  Each dollar raised from the tax increase gets counted by the Joint Committee on Taxation as offsetting new health spending at the same time that very same dollar is treated by the Medicare Actuaries as being deposited in the Medicare Trust Fund.  But if this sort of double counting is such a good idea, why stop at $54 billion?  Why not pay for the entire health care reform bill through HI tax increases that also extend the solvency of the HI trust fund?

Astonishingly, this may not even be the most cynical element of this tax increase strategy.  The proposed HI tax increase is not indexed for inflation.  This means that as inflation pushes up household income, more and more families will be subjected to the tax even though their standard of living remains the same.  If you don’t think this is a problem, consider the lengths Congress must go each year to extend the so-called “patch” that ensures more households are not subjected to the Alternative Minimum Tax (AMT).

At what level of taxation are Americans going to say “Enough!”  65%, 75%, 90%?

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