President Biden wants to raise payroll taxes on Americans earning more than $400,000 in a bid to keep Medicare solvent for at least another quarter-century.
The proposal – part of the president’s 2024 budget request set for release on Thursday – would raise Medicare taxes from 3.8% to 5% on annual income above $400,000, according to a White House fact sheet. Biden also floated closing a loophole used by business owners and higher-earners to shield some of their income from additional taxes.
“Let’s ask the wealthiest to pay just a little bit more of their fair share, to strengthen Medicare for everyone over the long term,” Biden said Tuesday in an op-ed published in the New York Times, adding: “This modest increase in Medicare contributions from those with the highest incomes will help keep the Medicare program strong for decades to come.”
On top of the tax increase, Biden’s plan includes a measure that would allow Medicare to negotiate prices for more drugs and sooner after they enter the market. That builds upon a provision included in the Inflation Reduction Act, passed by Democrats in the fall of 2022, that allowed Medicare to begin negotiating certain drug prices.
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“That’s another $200 billion in deficit reduction,” Biden wrote in the op-ed. “We will then take those savings and put them directly into the Medicare trust fund. Lowering drug prices while extending Medicare’s solvency sure makes a lot more sense than cutting benefits.”
The White House estimated the floated changes would extend the Medicare trust fund by an additional 25 years, “beyond 2050.”
The proposals are unlikely to garner much support in a deeply divided Congress, and face almost certain rejection from Republicans who won control of the House last year.
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Without any congressional action, the Medicare Trustees Report currently projects the federal health insurance program will be insolvent by 2028.
The tax-hike proposal comes just one month after Biden accused Republicans of wanting to slash Medicare and Social Security during his State of the Union Address, prompting cries of outrage from Republican lawmakers.
GOP lawmakers have repeatedly pushed back on that assertion, insisting they do not want to cut funding for either of the entitlement programs.
The back-and-forth between parties precedes looming budget negotiations on Capitol Hill over the federal debt limit, which is currently around $31.4 trillion. The U.S. government bumped up against that limit toward the end of January, prompting the Treasury Department to initiate a series of actions that are known as “extraordinary” measures and are intended to stave off a default.
The debt ceiling is the legal limit on the total amount of debt that the federal government can borrow on behalf of the public, including Social Security and Medicare benefits, military salaries and tax refunds.
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House Speaker Kevin McCarthy has indicated that Republicans could push for spending cuts to the federal budget before helping to raise the debt ceiling.
However, McCarthy has vowed that GOP lawmakers will not touch Medicare or Social Security as part of broader budget negotiations or cuts.