Joe Biden plans to impose higher taxes on the wealthy to help fund Medicare: report
President Joe Biden proposed new taxes on the wealthy on Tuesday to help fund funding, saying the plan would help extend the insurance program’s solvency by 25 years and provide middle-class stability to millions of older adults.
Biden is openly declaring in his plan that the rich should bear the heavy tax burden. His budget will draw a straight line between those new taxes and the popular health insurance program for people over age 65, essentially asking those who have done best in the economy to subsidize the rest of the population .
Biden wants to increase the Medicare tax rate from 3.8% to 5% on income over $400,000 a year, including wages and capital gains. The White House did not provide specific cost-saving estimates with the proposal, but the move would increase tax revenue by more than $117 billion over 10 years, according to earlier estimates in February by the Tax Policy Center.
“This modest increase in Medicare contributions for the highest earners will help keep the Medicare program strong for decades to come,” Biden wrote in a Tuesday essay in The New York Times. He called Medicare “the rock-solid guarantee that Americans can count on to be there for them when they retire.”
More than 65 million people rely on the program, which costs taxpayers nearly $900 billion each year. The number of Medicare enrollees is expected to continue to grow as the US population ages. But funding for the program is a problem with federal officials warning that without cuts or tax increases, Medicare funds may only be able to pay for 90% of benefits by 2028.
The Medicare changes suggested by Biden are part of a full budget proposal he plans to release on Thursday in Philadelphia. Moving the proposal through Congress would be difficult, with Republicans in control of the House and Democrats holding only a slim majority in the Senate.
The proposal is a direct challenge to GOP lawmakers, who argue that economic growth comes from tax cuts pushed by former President Donald Trump in 2017. Those cuts favor wealthy families and companies. They contributed to the high budget deficit, when the rapid growth that Trump had promised failed and the economy was derailed by the coronavirus pandemic in 2020.
The conflicting worldviews on how taxes will affect the economy are part of a wider showdown. Biden and Congress need to reach an agreement at some point this summer to increase the government’s borrowing authority, or else the government could default and plunge America into a debilitating recession.
Grover Norquist, president of Americans for Tax Reform and an advocate of tax cuts generally supported by Republicans, said the president’s plan would hurt the US economy.
Norquist said, “Biden tax hikes will raise the cost of goods and services for everyone, and make American workers and businesses less competitive internationally and versus China.”
But Maya McGuinness, chair of the Committee for a Responsible Federal Budget, praised the plan despite having some reservations about it.
“The president’s plan will commit hundreds of billions of dollars — perhaps closer to a trillion dollars — to strengthen Medicare,” said McGuinness, a fiscal watchdog focused on deficit reduction.
Ahead of expected budget tussles and the 2024 campaign season, Democrats have spoken out about Medicare, vowing to block any Republican efforts to cut the program, though the GOP has vowed to avoid any cuts so far. Have ditched. Still, Republican lawmakers have reached little consensus on how to deliver on their promise to get the government on a path toward balancing the federal budget over the next 10 years.
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Last year, members of the House Republican Study Committee proposed raising the eligibility age for Medicare to 67, which would match Social Security. But the idea did not take off in a divided Congress.
Republicans have denied they plan to cut the program. Sen. Rick Scott, R-Fla. A proposal that would require Congress to reconsider all federal laws every five years, including Medicare, has gained little traction.
Raising taxes on Americans making more than $250,000 to pay for Medicare garners broad support among older Americans, according to polls conducted in recent years by the nonpartisan Senior Citizens League. Raising the eligibility age for Medicare, however, is widely unpopular, said Mary Johnson, the organization’s policy analyst.
“It’s very clear, they were very, very opposed to raising entitlements,” Johnson said of recent polls.
Politicians who try that route “could lose supporters and it could backfire. You could even lose your office,” Johnson warned. “A very high percentage of seniors are voting in elections.”
Biden’s plan also takes aim at what the White House describes as loopholes that allow people to avoid Medicare taxes on certain incomes. In addition to taxes, Biden wants to expand Medicare’s ability to negotiate drug costs, which began with the Inflation Reduction Act. He signed the sweeping legislation last year.
The White House said its budget plan would expand the Pharmaceutical Drug provisions of the Inflation Reduction Act. More drugs will be subject to price negotiation, more drugs will be brought in the negotiation process soon and the scope of exemption will be increased.
Taken together, Biden’s new proposals would help shore up a key trust fund that pays for Medicare, which provides health care for older adults. According to the White House, the changes will keep the fund solvent until 2050, about 25 years longer than currently expected.
Changes will also be made to Medicare benefits. Biden wants to limit cost sharing to just $2 for some generic drugs. The idea would be to reduce the out-of-pocket expenditure for treatment of high blood pressure, high cholesterol and other ailments.
In addition, the budget would eliminate cost-sharing for up to three mental health or behavioral health visits per year.