One if by tax, two if by spend.
Megan McArdle reports on the White House non-starter plan to tax 529 education savings accounts — and everything else:
As I observed when I first wrote about the plan, the very fact that we are discussing taxation of educational savings — redistributing educational subsidies downward — indicates that the administration has started scraping the bottom of the barrel when seeking out money to fund new programs. Why target a tax benefit that goes to a lot of your supporters (and donors), that tickles one of the sweetest spots in American politics (subsidizing higher education), and that will hit a lot of people who make less than the $250,000 a year that has become the administration’s de facto definition of “rich”?
Presumably, because you’re running out of other places to get the money. The top tax rate on people who make more than $413,000 ($464,000 for married couples) is already almost 40 percent. That’s on top of Medicare taxes (2.9 percent, not capped), Social Security taxes, state and local taxes (in a deep blue area like New York City, these can amount to 10 percent, though you get some of that back by deducting state taxes from your federal tax) — a marginal tax rate of around 45 to 50 percent in blue states, and possibly even more if you run a business.
Capital gains are taxed at a lower rate, of course. But if you combine the Obamacare capital income surcharge for higher earners, and the administration’s new proposal to raise the base rate to 28 percent, you’re looking at a capital gains tax of almost 32 percent for people who make more than $200,000 a year ($250,000 for married couples). We are simply running out of room to pay for generous new programs with higher taxes on the small handful of people who make many hundreds of thousands of dollars a year.
Two thoughts on this, the first perfectly expressed in today’s ♡bamaCare!!! Fail comments by Longtime Sharp VodkaPundit Reader™ RBJ:
“My experience perfectly highlights the insanity of the Affordable Care Act. It forced me — a paying, insured, well-educated, healthy American — out of the coverage I’d had, then tried to push me into Medicaid.”
It’s not insane, it’s perfectly sane. The intent is to get you dependent upon the government for health care. It’s why Dear Liar’s plan to tax education 529 savings is sane: you do not work hard and save to pay for your education, it’s going to be a government freebie — making you dependent upon the government for higher education.
The second thought is slightly more involved.
Washington is reaching saturation point — it’s running out of income streams to finance its ever-increasing vote-buying schemes. It’s one thing to have a permanent underclass; it’s quite another to inflate the underclass with the ranks of the formerly middle class. And yet, that’s the road we’ve been on for a decade or longer now.
Those who survive this Big Squeeze are the Very Rich and the Devious Middle. The Very Rich will pay up enough in taxes to keep the Permanent Underclass from becoming revolutionaries, but will use their political clout to avoid any truly painful confiscations. The Devious Middle will be those remaining members of the middle and upper middle classes, forced into the ranks of the underground service economy, using Bitcoin and other electronic mattresses to hide their income and their savings.
It’s a nasty future, but don’t say that nobody warned you.