Biden Proposes Tax Hike on Income Over $400K to Fund Medicare

Democrats are hoping Biden’s budget, which would reduce the deficit by $2 trillion over the next 10 years, will provide a political advantage by keeping benefits intact, with higher taxes on the wealthy helping to offset rising costs.

Medicare’s Hospital Insurance Trust Fund, also known as Part A, pays for hospital stays, nursing facilities, and hospices. It is currently projected to reach insolvency as soon as 2028, according to the most recent Medicare Trustees report.

“This modest increase in Medicare contributions from those with the highest incomes will help keep the Medicare program strong for decades to come. My budget will make sure the money goes directly into the Medicare trust fund, protecting taxpayers’ investment and the future of the program,” Biden said in his op-ed.

Ending Loophole

In addition to the higher Medicare tax rate on income above $400,000, Biden’s plan would eliminate a loophole that allows certain business owners who receive income through an S corporation, limited liability company, or limited partnership to avoid paying Medicare taxes on some of their income.

The plan would also dedicate the proceeds from a tax created as part of Obamacare — known as the net investment income tax — to the Hospital Insurance Trust Fund. While doing so would not impact the overall federal deficit, since it amounts to diverting an existing revenue stream, the proposal does allow the administration to say it is extending the program’s solvency.

Proposed changes to Medicare’s ability to negotiate prescription drugs would also benefit seniors on Medicare by lowering their out-of-pocket costs, the White House says.

Biden’s budget will specifically propose capping the cost of certain generic drugs, like those used to treat hypertension and high cholesterol, to $2 per prescription per month. The budget also eliminates the fee patients have to pay on up to three mental or behavioral health visits per year.

(Photo: Bloomberg)