Blog entry March 2010

For many years, I have encouraged anyone wanting to invest in real estate to build an organization and get to the point where their income from it is passive. I have encouraged them to either grow an organization of employees or build a strong network of independent third party professionals to handle the stuff they could not do or did not want to do. I made strong arguments for them not wanting to do much of the details and focus on building a solid, sustainable business.

Today, Congress is very likely to pass health care reform. One of the myriad of things in there are a whole host of new taxes. One of those new taxes directly affects every single real estate investor in this country and signals a much bigger threat on the horizon. See buried in the reconciliation package written by the House is language imposing a 3.9% Medicare tax on passive income, "from any source what so ever". The income test triggering the tax is troubling too but that is likely to be corrected to follow the AGI model for other triggers in the tax code.

There is a very real possibility the House of Representatives will push through the current health care take over legislation.

I am not going to discuss whether this is good or bad for the average person. I am not going to discuss whether the mandate provisions are Constitutional. (They aren't but the challenges will have to wind their way through the court before being settled by SCOTUS.)

I am going to talk about what small and medium businesses face as a result of the passage of this legislation.