Biden proposes tax hike on income over $400,000 to fund Medicare

President Joe Biden’s budget will propose hiking payroll taxes on Americans making over $400,000 per year and allowing the government new power to negotiate drug prices as part of an effort the White House says will extend the solvency of a key Medicare program for another quarter century.

“The budget I am releasing this week will make the Medicare trust fund solvent beyond 2050 without cutting a penny in benefits,” Biden said Tuesday in an op-ed published in the New York Times shortly before the announcement. “In fact, we can get better value, making sure Americans receive better care for the money they pay into Medicare.”

The president’s budget, which will be released Thursday, proposes raising Medicare taxes from 3.8% to 5% on annual income above $400,000, and eliminating a loophole business owners and higher-earners can exploit to avoid additional taxes, according to a White House fact sheet. Biden’s plan would also help bolster Medicare reserves through some $200 billion in prescription drug reforms over the next decade by allowing the insurance program to negotiate costs on more medications and sooner after they come to market.

The Medicare portion of the budget plan was announced by the White House on Tuesday and reported earlier by the Washington Post.

The moves are part of a concerted effort by the White House ahead of looming negotiations over the debt ceiling and government funding, where Republicans vow to seek deep cuts to federal spending.

Biden’s plan has little chance of becoming law, especially after Republicans took control of the House of Representatives this year, but the proposal is an important signpost for negotiations over government spending, and offers the president a chance to publicly outline his priorities.

House Speaker Kevin McCarthy has vowed the GOP won’t touch Medicare or Social Security, programs that share bipartisan support, particularly among elderly voters. But Democrats, including Biden, have repeatedly highlighted past GOP efforts to overhaul the entitlement programs by reducing eligibility or benefits.