Taxes on Investment Income

Boles, C. (2010). US democrats defeat repeal of tax on investment income of wealthy. Retrieved March 24, 2010 from: http://www.foxbusiness.com/story/markets/democrats-defeat-repeal-tax-investment-income-wealthy/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxbusiness%2Flatest+%28Text+-+Latest+News%29

This article is published on the foxbusiness Web site and reports that the Senate Democrats successfully blocked the Republicans’ attempt to cut out a tax on the investment income of wealthy Americans; the tax revenue is to be used to help pay for the new health-care bill passed last week. Had it been successful, the Republicans’ amendment would have done away with the 3.8% tax on investment income for individuals making more than $200,000 and couples making more than $250,000. The Democrats believe this tax is necessary to help pay for health care and is not harmful to the economy because it only affects a small percent of people, who can afford it. The republicans believe that it is a “job killer” because it affects many of the people that are the job creators. Many see this as another way performing “income redistribution”, which opponents say discourages productivity and entrepreneurship. This subject is important for managers because taxes do affect the economy and business but are a necessary evil and have to be weighed from a cost/benefit standpoint. One thing is for sure, if a firm’s owner pays more taxes, they have to make up for the additional costs from somewhere else and this could be in the area of fewer employees. Is the benefit received from funding the health-care bill worth this cost? That debate will continue but it’s important for managers to be aware on what’s going on in the economy and how it affects them and their firm.