Biden proposes taxes on the rich to cover Medicare expenses
US President Joe Biden is expected to unveil his proposed budget on Thursday as he prepares for a likely reelection.
US President Joe Biden has proposed new taxes on the wealthy to help fund Medicare. He said the plan would help extend the solvency of the insurance program by 25 years and provide some middle-class stability to millions of older adults.
In his plan, Biden openly declares that the wealthy should bear a heavier tax. His budget would draw a direct line between those new taxes and the popular health insurance program for people over 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 percent to 5 percent on income over $400,000 a year, including salaries and capital gains. According to earlier estimates by the Tax Policy Center, that would likely increase tax revenues by more than $117 billion over 10 years.
MAGA Republicans on the Hill say the only way to be serious about preserving Medicare is to scrap it.
Well, I think they’re wrong.
I’m clearing my budget this week. In it, I will propose a plan to extend the life of Medicare by one generation without cutting benefits.
— President Biden (@POTUS) March 7, 2023
“This modest increase in Medicare contributions from those with the highest incomes will help keep the Medicare program strong for decades to come,” Biden wrote in an essay Tuesday in The New York Times. He called Medicare a “rock-solid guarantee that Americans have counted on to be there for them when they retire.”
The proposed Medicare changes were part of a fuller budget proposal that Biden planned to release Thursday in Philadelphia. Pushing the bill through Congress is likely to be difficult, with Republicans controlling the House and Democrats holding only a slim majority in the Senate.
The proposal is a direct challenge to GOP lawmakers, who have argued that economic growth comes from tax cuts like those enacted by President Donald Trump in 2017. Those cuts disproportionately benefited wealthier households and businesses. They contributed to higher budget deficits when growth failed to grow as fast as Trump had promised and the economy was derailed in 2020 by the coronavirus pandemic.
The conflicting worldviews of how taxes would affect the economy are part of a wider confrontation. Biden and Congress must strike a deal to increase the government’s borrowing power at some point by the middle of the year, or the government could default and plunge the US into a debilitating recession.
Ahead of the 2024 campaign season, Democrats have ramped up talks on Medicare, promising to fend off any Republican efforts to shut down the program, though the GOP has so far pledged to avoid budget cuts. Yet Republican lawmakers have reached little agreement on how to fulfill their pledge to put the administration on a path to balancing the federal budget over the next 10 years.
Last year, members of the House Republican Study Committee proposed raising the Medicare eligibility age to 67, which is consistent with the Social Security program, the U.S. public retirement plan. But that idea has not progressed in a divided Congress.
Republicans have denied that they intended to scrap Medicare. A proposal by Florida Republican Senator Rick Scott that would require Congress to review all federal laws every five years, including Medicare, has gained little traction.
Biden’s plan also aimed to close what the White House describes as loopholes that allow people to evade Medicare taxes on certain income. In addition to the taxes, Biden wanted to expand Medicare’s ability to negotiate prescription drug costs, a strategy that began with the Inflation Reduction Act. He signed the far-reaching legislation last year.
Taken together, Biden’s new proposals would help strengthen an important trust fund that pays for Medicare, which provides health care to older adults. According to the White House, the changes would keep the fund solvent until the 2050s, about 25 years longer than currently expected.
Changes would also be made to Medicare benefits. Biden wants to limit cost-sharing for some generics to as little as $2. The idea would lower out-of-pocket costs for treating hypertension, high cholesterol and other conditions.
In addition, the budget would end cost-sharing for up to three mental health or behavioral health visits per year.