WASHINGTON — President Joe Biden on Tuesday proposed new taxes on the rich to help fund Medicare, saying the plan would help to extend the insurance program’s solvency by 25 years and provide a degree of middle-class stability to millions of older adults.
Biden wants to increase the Medicare tax rate from 3.8% to 5% on income exceeding $400,000 per year, including salaries and capital gains. The White House did not provide specific cost-saving estimates with the proposal, but the move would likely increase tax revenues by more than $117 billion over 10 years, according to prior estimates in February by the Tax Policy Center.
“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 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.”
Senate Minority Leader Mitch McConnell, R-Ky., was quick to dismiss the plan, telling reporters that Biden’s budget agenda “will not see the light of day.”
More than 65 million people rely on Medicare at a cost to taxpayers of roughly $900 billion every year. The number of Medicare enrollees is expected to continue growing as the U.S. population ages. But funding for the program is a problem with federal officials warning that, without cuts or tax increases, the Medicare fund might only be able to pay for 90% of benefits by 2028.
Biden’s suggested Medicare changes are part of a fuller budget proposal that he plans to release on Thursday in Philadelphia. Pushing the proposal through Congress will likely 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 favor tax cuts like those pushed through by former President Donald Trump in 2017. Those cuts disproportionately favored wealthier households and companies. They contributed to higher budget deficits when growth failed to boom as Trump had promised. At the end of the former president’s administration, the economy was derailed by the coronavirus pandemic.
William Arnone, chief executive of the National Academy of Social Insurance, says there’s some risk in taxing wealthier Americans more for the program, given that they already pay more in premiums for Medicare coverage as well.
“At some point higher-income Medicare enrollees may say: ‘This isn’t a good deal for me anymore,’” Arnone said. “The genius of social insurance is that we all pay in, and we all get something out in return. If higher income people start to question the equity – that could lead to a loss confidence in the program.”
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