The Biden budget proposal would increase the Medicare tax for Americans earning more than $400,000
WASHINGTON – President Joe Biden wants to raise tax rates on people making more than $400,000 a year to extend Medicare solvencythe White House said Tuesday in a preview of his budget proposal.
The Medicare tax rate will rise to 5% from 3.8% on earned and unearned income for wealthier Americans, according to the White House. Biden will announce his budget plan on Thursday.
Biden will also propose benefit changes, including capping to $2 how much a Medicare recipient must pay out-of-pocket for certain generic drugs, such as those used to treat chronic conditions such as hypertension and high cholesterol. And he wants to expand Medicare’s ability to negotiate lower prescription drug costs.
The Medicare tax increase, along with other proposed changes, would extend the solvency of Medicare’s hospital insurance fund for at least two decades, according to the administration.
The fund, which is funded primarily by payroll taxes, is expected to fall short of what it needs to pay all projected costs in 2028, according to Medicare trustees.
In recent months, Biden has been hammer the Republicans over Medicare and Social Security, programs that are extremely popular but account for large—and increasing—chunks of the federal budget.
“Let’s ask the wealthiest to pay a little more of their fair share to strengthen Medicare for all over the long term,” Biden wrote in a statement published in The New York Times on Tuesday.
Medicare and Social Security are major drivers of the federal budget due to an aging population and rising health care costs.
While Biden has said for weeks that he has a plan to shore up Medicare, he has yet to say the same for Social Security, which may not be able to pay full benefits by 2032.
Top Republicans have said cuts to Medicare and Social Security are off the table as they demand budget cuts in exchange for agreeing to vote to prevent the federal government from defaulting on its debt. But they haven’t offered a plan to keep the programs flush enough to continue paying full benefits.
How would Biden support Medicare?
Biden would increase the top rate of the Medicare payroll tax and the net investment income tax to 5% for high-income taxpayers. He would also expand the net investment income tax to apply to more types of income and redirect revenue to help Medicare. This tax, created as part of the 2010 Affordable Care Act, currently raises general funds. The White House claims it was always meant to boost Medicare. But while this change would help Medicare, it would reduce income for other government programs.
Biden also wants to reduce Medicare costs by lowering what the government pays for prescription drugs to beneficiaries.
How Much Are Medicare Taxes?
Salary is taxed at 2.9% with employees and workers each paying half. Taxpayers earning over $200,000 owe an additional 0.9%. They also owe 3.8% on capital gains and investment income, a general income tax Biden wants to redirect to Medicare.
How would Biden improve Medicare benefits?
Increase the government’s ability to negotiate drug costs beyond what was included law passed last year could cut out-of-pocket costs for seniors. Biden also wants to limit cost-sharing for certain generic drugs. And he would eliminate out-of-pocket costs for three mental health or other behavioral health visits per year.
This article originally appeared on USA TODAY: The Biden budget proposal would raise the Medicare tax for earners over $400,000