The biggest issue, however, is the additional penalty the tax will impose on the savings that finance investment and fuel long-run economic growth.
It's true that relatively few Americans have high enough incomes to be subject to the tax. But they account for a large portion of what the nation saves, magnifying the economic impact.
IRS data for 2010 reveal that the 3 percent of taxpayers with incomes of more than $200,000 received 45 percent of the interest income, 58 percent of the dividends and 88 percent of the capital gains (net of losses).
More taxpayers and more saving will gradually become subject to the "unearned income Medicare contribution tax" in coming decades because its income thresholds will not be adjusted for inflation.
Even if the high-income portions of the 2001 and 2003 tax cuts are fully extended, the "unearned income Medicare contribution tax's" arrival next year will raise the top rates on interest, dividends and capital gains 3.8 percentage points above this year's levels.
Or, if the high-income provisions are allowed to expire, it will push the top rates on interest, dividends and capital gains 3.8 percentage points above Clinton-era levels.
Even if we can't repeal this tax, we should at least keep in mind its burden on saving as we decide the fate of the 2001 and 2003 tax cuts.
Finally, if we keep the "unearned income Medicare contribution tax," we should give it a more accurate name. The IRS is now calling it the "net investment income tax."
I prefer to call it a "tax on income earned by savers."
Alan D. Viard is a resident scholar at the American Enterprise Institute.