As part of his budget proposal for 2024, President Joe Biden has proposed increasing the wealthiest people's taxes to sustain Medicare for at least 25 years.
According to the White House, the plan would boost the net investment income tax from 3.8% to 5% on incomes over $400,000, including regular income, capital gains, and so-called pass-through company income, which flows to individual tax returns.
Biden Proposes New Taxes For Wealthy Americans
The net investment income tax, enacted by the Affordable Care Act, now applies to incomes above $200,000 for single taxpayers and $250,000 for married couples filing jointly, CNBC reported.
In addition, the plan seeks to enhance Medicare's power to negotiate prescription medication pricing beyond the Inflation Reduction Act's provisions. Yet, it seems improbable that the Republican-controlled House of Representatives would approve Biden's proposal.
The idea was introduced amid a debate about the future of Medicare and Social Security as Congress faced an impending fiscal crisis. According to the Congressional Budget Office, the US Department of the Treasury will exhaust its resources to prevent a debt default between July and September if Congress does not raise the debt ceiling.
Despite support for preserving Social Security and Medicare at President Biden's January 2023 State of the Union speech, lawmakers are concerned about Social Security and Medicare losses as they debate whether to extend the debt ceiling.
According to the administration, the tax increase and other suggested modifications would extend the solvency of Medicare's hospital-insurance fund by at least two decades. Medicare trustees said the fund, mostly supported by payroll taxes, is estimated to be insufficient to cover all anticipated expenses by 2028.
In recent months, Biden has criticized Republicans for their stances on Medicare and Social Security, two wildly popular programs that make for huge and growing portions of the federal budget.
Per USA Today, Biden would raise the maximum Medicare payroll tax and net investment income tax rates for high-income taxpayers to five percent. In addition, he would apply the net investment income tax to new income categories and redirect the funds to Medicare.
Biden also wants to minimize Medicare expenses by decreasing the amount the government pays for beneficiaries' prescription medicines. Seniors' out-of-pocket expenses might be reduced by expanding the government's power to negotiate prescription prices beyond what was contained in legislation approved last year.
US Debt Ceiling
Biden also seeks to limit cost-sharing for several generic medications. And he would erase their out-of-pocket expenses. The Republican Party has not yet released its budget proposal, but it will likely reduce foreign aid and help the needy, including food, health care, and housing.
Each party's plan will serve as the starting point for discussions between Speaker Kevin McCarthy and President Joe Biden over expenditures for the fiscal year beginning September 1, 2024.
Passing a budget to keep the federal government operating would require the cooperation of both parties; McCarthy must keep his Republicans in line in the House, and Senate Majority Leader Chuck Schumer will need all of his Democrats in the Senate.
Yet the vastly divergent approaches set the stage for a policy conflict that will play out against the background of election-year politics as Biden prepares to run for reelection and Republicans attempt to retake the Senate while retaining the House.
Details of the president's budget, which he will formally introduce on Thursday in Philadelphia, have begun to emerge. The New York Times claimed that the president believes he can reduce federal budget deficits by at least $2 trillion over the next decade by imposing a new tax on people worth more than $100 million.
When the government approaches its debt ceiling, the deficit provision will become a new subject of contention. Per Daily Mail, Biden has refused to engage with Republicans on the issue of lifting the debt ceiling, instead preferring a clean increase, as has been done for previous presidents, including Trump.
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