Wealthy taxpayers will ante up more than double the taxes in 1991 to cover spiraling Medicare costs, thanks to an effort by Congress to have higher- income citizens bear more of the nation's tax burden.
For workers earning $125,000 or more, the Medicare withholding tax will increase $1,068.65 a year - an added expense that will be matched by employers, too.Self-employed people in that income range will be hit even harder; their additional tax bill will run up to $2,137.30.
"We fought this tooth and nail," said D.J. Gribbon, a lobbyist for the National Federation of Independent Business in Washington.
Mr. Gribbon said payroll taxes - which include Social Security and Medicare withholdings - represented the largest tax payments for the 550,000 small businesses in his organization.
"It's a big chunk of their tax burden, and anything that increases the payroll tax just drives them nuts," he said.
The Medicare tax was a prime target for an increase last fall when legislators went searching for ways to raise more revenue for the debt-ridden federal government.
Why? Because Congress could get more revenue and, more important, more taxes from the wealthy by raising the maximum wage for calculating the Medicare tax. Thus, an increase in that tax became attractive for political reasons.
"It has some political appeal because it looks like it's hitting high- income earners," said Ed Tepper, a tax specialist in the Philadelphia office of Ernst & Young.
According to an estimate by the House Ways and Means Committee, the change in the Medicare tax will generate about $26.8 billion over the next five years.
"It's going to increase the coffers of the federal government by a substantial amount," Mr. Tepper added.