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FRONT PAGE CONTRIBUTOR

Another Charming Aspect of the ObamaCare Minefield.

Beginning January 1, 2013, ObamaCare imposes a 3.8% Medicare tax on unearned income, including the sale of single family homes, townhouses, co-ops, condominiums, and even rental income.

– Congressman Jeb Hensarling. (GOP.gov)

I would like to praise our President for his political courage and honesty. While running for office, Barack Obama flat-out told Joe the Plumber he intended to spread the wealth. I think he sincerely believes that this taxation would primarily effect the rich, improve America’s Gini Coefficient, and help pay for his gateway program to Single-Payer Federal healthcare known as ObamaCare.

Regrettably, this tax will not accomplish this laudable goal. Like a lot of the poorly-designed, economic programs of this administration, this program will destroy more wealth than it ever gets around to actually transferring. The negative externalities of this proposal will be legion. I will attempt to outline the ones that come to mind in the post below.

We start with the housing market. This is the most likely place for a sudden spike in liability for people who are not truly rich by historic standards. Eighteen US states had Median home sales prices of $223k or higher according to Trulia.com’s heat map. This implies that almost ½ of these sellers would have been taxed on their proceeds at 3.8%. This is particularly pernicious in areas such as Hawai’i and Washington, DC where even very modest and unassuming residences would trigger this sort of a tax.

Yet this only accounts for the 1st order effects of the taxation. One of the few good news stories out there on the US Economy was a positive up-tick in US Housing Starts in May 2011. This provides jobs and income for contractors and suppliers who have basically had a meager go of it since maybe late-2007. Surely positive trends will not endure when new home buyers realize that they will eat a dead-weight loss of $11,400 on the sale of a $300,000 residence.

This will also have a knock-on unemployment multiplier effect on the people who pave roads to new subdivisions. It will require fewer realtors and settlement attorneys to handle the decreased sales volume. Home values will adjust downward in reaction to the penalty tax that a homeowner has to pay to escape a current residence. This will lead to a downward pressure on tax assessments for residential property which will further complicate the efforts of state and local governments to run organizations such as schools.

Beyond the effect on the housing market, this also could increase the difficulty new businesses have in finding the best workforce to hire. One of America’s great strengths as a nation is the mobility of our labor capital. Put a 3.8% Escape Tax on the mobility of the American workforce and potential employers will have to pay more to recruit out-of-towners, facilitate offsite work collaboration through technology, or limit their recruiting to the commute range of their facility.

This insidious tax will severely impact the economic vitality of many Americans. We currently still enjoy a freedom of movement that makes America one of the greatest countries that has ever existed. All of this can no longer be yours, America, if we don’t take charge of our political system and dramatically change course between now and 1 January, 2013.

Congresswoman Pelosi famously explained to us that we would have to pass ObamaCare to see what was in it. Now that we’ve seen the glorious details, we will also have to fire President Obama if we want to make it go away. Thus, if we want to be able to move out of a decent house without paying a 3.8% “Change You Can Believe In” surcharge, November 2012 will be time to party like its 1773.

Correction: You would have to own the $300,000 home free and clear to pay $11,400 on it. If you cleared $100,000 on the deal, you would owe $3,800.

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