From Deseret News archives:
Congress eyes billionaires in quest for Medicare tax hike
Such estimates are being cited by backers of a proposal in the U.S. House of Representatives to raise taxes on hedge-fund and private-equity managers. Simons, the Renaissance Technologies Inc. chairman, earned $1.7 billion last year, according to Institutional Investor's Alpha magazine; his income is largely exempt from Medicare and other payroll taxes because it is considered a capital gain.
The House measure, sponsored by Rep. Sander Levin, a Michigan Democrat, would require those earnings to be classified as compensation and subject them to the 2.9 percent Medicare tax. He and other lawmakers are using the image of billionaires avoiding Medicare payments to win support for requiring fund managers to pay taxes at rates as high as 35 percent instead of the 15 percent capital-gains rate.
"Tax equity is really the basic issue here," said Levin. "Those who pay 15 percent don't pay Medicare when those who pay the higher tax do."
The change, which would raise as much as $1 billion annually and cover the cost of insuring about 98,000 people, would provide a small boost for Medicare, which is projected to exhaust its assets by 2019 as the U.S. population ages and health-care costs rise faster than inflation.
"It's a pretty small percentage," said John Holahan, a senior fellow at the Washington-based Urban Institute who studies health-care finance. "But for a program that is going to face increased financial pressure, every bit helps." The program will provide health-care coverage to more than 40 million people this year at a cost of $436 billion, the nonpartisan Congressional Budget Office
said in a report last month.
Simons, 69, hasn't taken a position on the tax proposal, his spokeswoman Joan Campion said. She wouldn't confirm his reported income or comment on the Medicare tax. Robert Stewart, a spokesman for the Private Equity Council, a Washington-based trade group for the largest buyout firms, said the industry opposes any tax increase and rejected Levin's assertion that the fund managers aren't paying their fair share.
Private-equity managers "pay Medicare, payroll and other taxes on their ordinary income, which can represent a significant portion of their earnings," Stewart said. "Like everyone else, they pay long-term capital-gains taxes on the profits they earn from the sale of appreciated capital assets."
