Democrats propose raising taxes on some high earners to bolster Medicare

WASHINGTON — Senate Democrats will push to raise taxes on some high-income Americans and direct the money toward improving Medicare solv...

WASHINGTON — Senate Democrats will push to raise taxes on some high-income Americans and direct the money toward improving Medicare solvency, officials briefed on the plan say, as they cobble together a modest version of the package President Biden’s blocked tax and spending.

The proposal is expected to raise $203 billion over a decade by imposing an additional 3.8% tax on income from owning part of what is known as a middleman business, such as a law firm or a doctor’s office. It is estimated that the money that would be generated by the change would be enough to extend the solvency of the Medicare trust fund that pays for hospital care – currently on track to start running out of money in 2028 – until 2031.

It is the most recent agreement to emerge from private negotiations between Sen. Chuck Schumer of New York, the Majority Leader, and Sen. Joe Manchin III of West Virginia, a conservative-leaning Democrat who has demanded that his party is curbing his ambitious ambitions for a domestic policy project. In December, Mr. Manchin torpedoed efforts to push through Mr. Biden’s $2.2 trillion social safety net, climate and tax package over concerns about its cost and impact on the economy at a time of rising inflation.

His support is essential because, with Republicans expected to be evenly opposed, the only way Democrats can push the package through the equally divided Senate is to win the unanimous support of their caucus and do so under special budget rules that would protect it. of a buccaneer and allow him to pass by a simple majority.

Mr Schumer worked to salvage key elements of the plan that could pass this test, including a plan released Wednesday to reduce the cost of prescription drugs. Mr. Manchin has repeatedly said that such legislation should focus on tax reform and drug pricing, as well as efforts to reduce the national debt. The bill is also expected to include some climate and energy provisions, a key priority for Democrats, though they have yet to be approved.

Democratic leaders, who hope to push the bill through the Senate this month, are expected to officially release the Medicare plan in the coming days, according to the officials, who released preliminary details on condition of anonymity.

The fast-track budget process the party plans to use for the entire package, known as reconciliation, requires the legislation to adhere to strict budget rules enforced by the Senate parliamentarian. Prescription drug legislation has gone through parliament, and Democrats plan to submit tax increases and Medicare in the coming days.

The part of Medicare that pays hospital bills is funded by a special trust fund, largely funded by payroll taxes. But with escalating health care costs and an aging population, today’s incomes won’t be enough to pay all Medicare hospital bills indefinitely. According the most recent report from Medicare administratorsthe fund will be depleted in 2028 with no new revenue or reduction in spending.

The Democrats’ plan would extend an existing net investment income tax of 3.8% to so-called pass-through income, from businesses that distribute profits to their owners. Many people who work at these firms – such as associate lawyers and hedge fund managers – earn high incomes, but avoid the 3.8% tax on most of it.

The new proposal would only apply to people earning more than $400,000 a year, and co-filers, trusts and estates earning more than $500,000, in line with Mr. Biden’s pledge not to increase the taxes for people earning less than $400,000 a year. . The proposal is similar to a tax hike proposed by Mr. Biden in 2021 to help offset the cost of a set of new spending programs intended to help workers and families, such as home health care and health care. child care.

Imposing the new tax on pass-through income would raise about $202.6 billion over a decade, according to a Joint Committee on Taxation estimate provided to Senate Democrats and reviewed by The New York Times. Those funds would flow directly into the Hospital Insurance Trust Fund, which covers inpatient hospital care, some home health care and palliative care.

The Centers for Medicare & Medicaid Services Office of the Actuary advised Democratic staff that the additional revenue generated would extend the solvency of the hospital’s trust fund from 2028 to 2031.

“Medicare is a lifeline for millions of American seniors and Senator Manchin has always supported ways to ensure he remains solvent,” said Sam Runyon, spokesman for Mr. Manchin. “He remains optimistic that there is a way to get there.”

She warned that a comprehensive agreement on a broader climate, fiscal and spending package has yet to be reached. Some Democrats also hope to include an extension of the Affordable Care Act’s expanded grants, which passed by a party vote in the $1.9 trillion pandemic relief package in 2021.

“Senator Manchin still has serious unresolved concerns, and there is a lot of work to do before it is conceivable that an agreement can be reached that he can sign,” Ms. Runyon said.

Although Mr. Manchin has said he would support further tax increases, any changes to the tax code must also win the support of Senator Kyrsten Sinema of Arizona, a centrist who has opposed many of the proposals. his party’s initial taxes.

And while many Democrats are eager to tackle climate change ahead of the midterm elections, which could shift the balance of power in Washington, Mr. Manchin, who has protected his state’s coal industry, continues to haggle over this issue.

The heart of the climate plan is expected to be around $300 billion in tax credits to expand the development of clean energy like wind, solar and battery storage, a much smaller plan that reflects concessions to M Manchin, according to several people familiar with the negotiations.

Negotiators are also considering tax credits to incentivize the purchase of electric vehicles, although it is unclear whether Mr Manchin will support such a provision.

Lisa Friedman contributed report.

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Newsrust - US Top News: Democrats propose raising taxes on some high earners to bolster Medicare
Democrats propose raising taxes on some high earners to bolster Medicare
Newsrust - US Top News
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