WASHINGTON — Vice President Joe Biden proposed new taxes on the wealthy on Tuesday to help fund Medicare, saying the plan would help extend the insurance program’s solvency by 25 years and provide some middle-class stability to millions of older adults.
Biden is making it clear that he believes the wealthy should pay a higher tax rate in his proposal. In his budget, those who have done well economically would be asked to subsidize those who haven’t by directly linking those new taxes to the popular health insurance program for those over 65.
Biden has proposed a rise in the Medicare tax rate from 3.8% to 5% for those with annual incomes in excess of $400,000 (this includes salaries and capital gains). In addition to the proposal, the White House did not include any specific cost-saving estimates, but the Tax Policy Center predicted in February that the move would increase tax revenues by more than $117 billion over 10 years.
“This modest increase in Medicare contributions from those with the highest incomes will help keep the Medicare program strong for decades to come,” Biden wrote in an essay published in The New York Times on Tuesday. Medicare is a “rock-solid guarantee that Americans have counted on to be there for them when they retire,” he said.
On Tuesday, Republican Senate Minority Leader Mitch McConnell of Kentucky told reporters that Biden’s budget agenda “will not see the light of day.”
Medicare is used by over 65 million people annually, and it costs the government around $900 billion. Due to the aging of the US population, Medicare enrollment is predicted to rise further. However, the Medicare fund may only be able to pay for 90% of benefits by 2028 unless cuts or tax increases are made, according to federal officials.
Biden plans to unveil his comprehensive budget proposal this Thursday in Philadelphia, which will include his proposed changes to Medicare. As the Republicans control the House and the Democrats hold a razor-thin majority in the Senate, it will be difficult to push the proposal through.
Republican lawmakers, who have argued that tax cuts like the ones enacted by former President Donald Trump in 2017, will be directly challenged by the proposal. The cuts helped wealthy individuals and businesses
disproportionately. They helped increase deficits when growth didn’t accelerate as Trump predicted and was further derailed in 2020 by a coronavirus pandemic.
The competing visions of how taxes would affect the economy are just one front in a larger conflict. If Biden and Congress can’t come to an agreement to increase the government’s borrowing authority this summer, the United States could default and enter a crippling recession.
Republican tax cut advocate Grover Norquist said the president’s plan would hurt the economy.
To paraphrase Norquist, “the Biden tax hikes will raise the cost of goods and services for everyone,” and will make American workers and businesses less competitive internationally and in comparison to China.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, had some reservations about the plan but ultimately praised it.
As a fiscal watchdog concerned with deficit reduction, MacGuineas noted that “the president’s plan would generate hundreds of billions of dollars — perhaps even approaching a trillion dollars” to strengthen Medicare.
Karine Jean-Pierre, the White House press secretary, wouldn’t answer questions about the budget’s specifics. After promising not to “dive into the math” with reporters on Tuesday, she assured them that Biden’s proposal on Thursday “will be very detailed and transparent.”
Democrats have increased their rhetoric regarding Medicare in anticipation of a budget dispute and the 2024 election season, and they have vowed to fight any Republican attempts to cut the program. However, the GOP has stated that they will not make any cuts to Medicare. Even so, Republican lawmakers have not settled on a plan to implement their pledge to balance the budget within the next decade.
Members of the House Republican Study Committee proposed a year ago to raise the Medicare eligibility age to 67, bringing it in line with Social Security. However, a divided Congress has been unable to advance the idea.
Repubicans have denied rumors that they intend to slash funding for the program. Florida Republican Senator Rick Scott’s proposal to have Congress review all federal laws every five years, including Medicare, has stalled in the Senate.
According to Mary Johnson, a policy analyst for the nonpartisan Senior Citizens League, who has researched the issue, increasing the eligibility age for Medicare is widely unpopular, but increasing taxes on Americans making more than $250,000 to pay for Medicare has broad support among older Americans.
Politicians who take that tack run the risk of alienating their supporters and backfiring. “You can lose your job,” she warned. A large proportion of senior citizens are participating in elections.
The White House has characterized certain income streams as “Medicare tax loopholes” that Biden’s plan seeks to close. Biden also wants to increase Medicare’s ability to negotiate drug prices, a process that was initiated by the Inflation Reduction Act but would benefit from expansion. Last year, he signed the sweeping bill into law.
The Trump administration has stated that its proposed budget will expand the Inflation Reduction Act’s provisions relating to pharmaceutical drugs. There would be more drugs whose prices could be negotiated, more drugs added to the negotiation process earlier, and more rebates offered.
When put together, Biden’s new ideas would strengthen a vital trust fund that pays for Medicare, the nation’s healthcare program for the elderly. The White House claims that with the adjustments, the fund will be solvent until the 2050s, which is 25 years later than was previously projected.
Medicare provisions would also undergo modifications. For certain generic drugs, Biden proposes setting a $2 cap on patient co-payments. Treatments for conditions like hypertension and high cholesterol would be more affordable under this proposal.