Thursday, July 19, 2012

About the health care law's 3.8 percent tax

John Eaton doesn't see himself as someone in the business of batting down falsehoods, but the 3.8 percent questions keep coming and he feels duty bound to answer them.

"Every week I get asked about it," said Eaton, government affairs director for the Idaho Association of Realtors, who was in Idaho Falls Wednesday to speak at the Realtors Political Action Committee picnic in Tautphaus Park.

The number 3.8 (go ahead and Google it) refers to a Medicare tax imposed by the new health care law on capital gains from investment income.

At some point in the past two years, Eaton said, a newspaper article reported that for anyone with an income above $200,000, or couples with adjusted gross income of more than $250,000, a 3.8 percent tax would be imposed on home sales and real estate transactions.

The AGI part was right, but a lot else was wrong, Eaton said. Once it went viral, people began hearing that if they sell a home for $100,000 they will be paying $3,800 to fund Medicare. As one might expect, this was not well received.

Here's the way it's actually intended to work, starting in 2013:
  • If you report $1 million in capital gains (which can include real estate sales), you pay $19,000.
  • If you report $600,000 in capital gains, you pay $3,800.
  • If you report $525,000 in capital gains, you pay $950.
  • If you report $500,001 in capital gains, you pay 38 cents.
Eaton said he doesn't see the provision affecting a lot of Idaho homeowners. "It may affect people in states where property values are higher," he said.

He suggested that anyone who wants a more detailed explanation should visit http://www.snopes.com/politics/taxes/realestate.asp.

I can already hear some of you fulminating about this, but for the sake of your blood pressure I would like to caution that the Realtors Political Action Committee is hardly a hotbed of liberalism. Here are its guiding principles:

  • Protect private property rights
  • Reduce unnecessary regulations and government intrusion
  • Ensure a fair tax code
  • Protect the American Dream of Home Ownership
Eaton's Twitter feed is https://twitter.com/IdahoRPAC.