Big Obamacare tax increase this year due to inflation

The Obamacare tax was imposed in 2013 on “net investment income” in order to shovel more money from Americans who don’t work in health care to Americans who do work in health care. Capital gains from selling a house, interest, dividends, etc. are hit with an extra 3.8 percent federal tax. For an individual filer, the first $200,000 is exempt, but this amount is not indexed to inflation. The Obamacare law was signed in March 2010. If the threshold had been indexed to the official CPI, it would be over $260,000 today. So the government is collecting an extra $2,280 from everyone who would have been subject to this tax as originally envisioned. Given that the main reason an average taxpayer would be hit by this tax is selling a house, what if we instead indexed this to the average price of a house? It was $275,000 in March 2010 (St. Louis Fed) and is about $500,000 today. So the $200,000 threshold should be $367,000.

From a recent trip to Dezerland Orlando (huge hit with the kids!), the Dr. Dude pinball machine that can serve as a helpful guide to where money from this tax is being spent:


  • “Homes Earned More for Owners Than Their Jobs Last Year” (WSJ): Increase in value of typical U.S. home exceeded median worker income for first time, Zillow says
  • “Here’s how rising inflation may lead to higher tax bills” (CNBC, Nov 2021): “It’s a hodgepodge of things that get left out,” said certified financial planner Larry Harris, director of tax services at Parsec Financial in Asheville, North Carolina. “And it’s not just hitting wealthy taxpayers.” For example, couples filing together selling their primary home may exclude up to $500,000 of profit from capital gains taxes ($250,000 for single filers), provided they meet the ownership and use tests. These amounts haven’t changed since 1997, despite median home sales prices more than doubling over the past 20 years, and property values have outpaced wages over the past decade.

8 thoughts on “Big Obamacare tax increase this year due to inflation

  1. It’s funny, but not funny ha-ha, that entitlements such as social security are indexed to inflation but taxes seldom are. The reason I oppose taxes on the very wealthy is that it seems obvious to me that it is inevitable that a tax purportedly targeting the very rich will eventually apply to the merely wealthy, then the well to-do, and eventually to anybody who is above poverty.

    Remind me, what percentage of the population was targeted for the Federal income tax when the 16th amendment was passed?

  2. “Increase in value of typical U.S. home exceeded median worker income for first time”

    It’s not increase in value of real estate (the homes are the same) but decrease of value of money (aka inflation). Trust WSJ to have only total economic illiterates on the staff.

    A truthful description would be “the real value of wages plummtes due to massive inflation caused by the insane pandemic response and the insane economic sanctions on a major supplier of raw materials and fuels”. But we can’t have the truth in media, can we?

    • Are you saying the inflation is due to Putin? Isn’t it too convenient to spend print money for a year and then blame the result on sanctions that started only what a month ago?

    • Well, the “sanctions from hell” weren’t imposed by Putin…

      Anyway, the reason for price inflation is either monetary inflation (i.e. increased supply of money), or reduction in productivity (i.e. decreased supply of goods), or both.

      Lockdowns, hours/capacity limiting, travel restrictions all reduce productivity. So does dropping supply of inputs to production (energy, materials) due to sanctions.

      And endless “stimulus” (aka government giving and spending freshly printed money; also artificially low interest rates) increases money supply.

      But, yeah, Putin was chosen as the fall guy. The journos and politicos will all be blaming Putin for the mess they created themselves. As always.

  3. This pinball machine displays heresy, given that “Sag’ [n]ein zu Drogen” == “Say no to drugs” == “Just say no”, which was a Reagan campaign!

    • “Скажи наркотикам ні!” – that’s me, trying my Ukrainian, LOL.

      (“No” in “say no to drugs” in Ukrainian is spelled as HI… and “хай!” (hi!) is a common greeting between youngsters in Slavic countries –> epic social advertisement fail).

  4. > So the government is collecting an extra $2,280 from everyone who would have been subject to this tax as originally envisioned.

    It’s a Perpetual Motion Machine!

    “Well, sure, it would stop on its own due to the laws of physics, but we include a special “kick” to keep it going.”

    I’ll skip the Resurrection jokes because they are blasphemous.

    Happy Easter.

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