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Tax Law Changes


Submitted By sweetygenesee
Words 1596
Pages 7
There have been many changes to the US income tax code for the year 2013. Some of them are small and will have marginal impact On payers of income taxed to the US government. Other changes will be more significant. The budget battles in Congress in 2012 while the country was deemed to be heading for a fiscal cliff resulted in tax code changes that are supposed to raise revenues for the federal government while simultaneously leaving the economic recovery in the United States unaffected.
The main change in the federal tax code to be highlighted in this paper is the Unearned Income Medicare Contribution. It is also referred to as the Medicare contribution tax, the 3.8% tax, the investment tax, and the Medicare tax. This new tax is unique or different from other taxes in a number of ways. First, this tax is levied on income in addition to an income tax. Income is always subject solely to the income tax. Under earned income includes rents, dividends, earnings to subchapter S corporations and various partnerships and other entities. Surprisingly, the government revenues from this tax will be deposited into the general fund and will not be sent to Medicare directly. It is highly unlikely, due to the politics involved, that these funds purportedly raised to help Medicare will ever be spent for that purpose (Viard, 2012). It is expected that this tax could adversely affect small business owners and especially self-employed farmers. 2 senior citizens on Social Security and other people who received fixed incomes will also be subject to this tax this could be viewed as having a tax that could be especially burdensome to those that it was trying to help (Perez, 2013).

Since unearned income results from investments made with funds that would be not be used for immediate consumption but rather to be invested sometimes risky adventures that hopefully generate employment, this

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