Dems look to tax high earners
Proposal would have those making more than $400K a year pay more to keep program solvent
Senate Democrats want to boost taxes on some high earners and use the money to extend the solvency of Medicare, the latest step in the party's election-year attempt to craft a scaled-back version of the economic package that collapsed last year, Democratic aides told The Associated Press.
Democrats expect to submit legislative language on their Medicare plan to the Senate's parliamentarian in the next few days, the aides said. It was yet another sign that Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va., could be edging toward a compromise the party hopes to push through Congress this summer over solid Republican opposition. Manchin scuttled last year's bill.
Under the latest proposal, people earning more than $400,000 a year and couples making more than $500,000 would have to pay a 3.8% tax on their earnings from tax-advantaged businesses called pass-throughs. Until now, many of them have been using a loophole to avoid paying that levy.
That would raise an estimated $203 billion over a decade, which Democrats say would be used to delay until 2031 a shortfall in the Medicare trust fund that pays for hospital care. That fund is currently projected to start running out of money in 2028, three years earlier.
Most U.S. businesses are pass-throughs, which include partnerships and sole proprietorships and range from one-person law practices to some large companies. Owners count the profits as income when they pay individual income taxes, but such companies do not pay corporate taxes — meaning they avoid paying two levels of taxation.
Democrats this week also sent the parliamentarian a separate 190-page piece of the emerging Schumer-Manchin compromise aimed at lowering prescription drug costs for patients and the government. Provisions include requiring Medicare to negotiate drug prices, limiting beneficiaries' out-of-pocket costs to $2,000 annually and increasing federal subsidies for copays and premiums for some low-income people.
With November elections for control of Congress approaching, Democrats hope the two proposals will be a remedy for a campaign season that so far looks bleak. Republicans are favored to win a majority in the House and could do the same in the Senate.
Democrats say both plans will show voters they are battling to curb health care costs and protect the widely popular Medicare program, positions they say will be dangerous for Republicans to oppose.
Polls show widespread public alarm over recent months' historically high inflation rates, supply chain problems and other economic issues that along with President Joe Biden's dismal popularity ratings are pushing voters Republicans' way, the GOP said.
Medicare has 64 million beneficiaries. Its trust fund covering hospital services is financed largely from taxes deducted from peoples' paychecks.
That trust fund gained two years of solvency, until 2028, in last month's report by the program's board of trustees.