Washington — Democrats in the Senate will raise taxes on some high-income Americans and divert funds to improve Medicare’s solvency, according to officials who explained the plan.
The proposal raises $ 203 billion over a 10-year period by imposing an additional 3.8% tax on income earned from owning some of what is known as pass-through businesses such as law firms and medical institutions. It is predicted that. The money that the change will generate is estimated to be sufficient to expand the solvency of the Medicare Trust Fund to pay for hospital care — currently set to begin to run out in 2028 — Until 2031.
The latest agreement, the latest agreement between Senator Chuck Schumer of New York and Senator Joe Manchin of West Virginia (a conservative Democrat), who is the leader of the majority party. The party is a domestic policy plan. In December, Manchin rushed to pass Biden’s $ 2.2 trillion social safety net, climate and tax package because of concerns about the costs and economic implications of rising inflation.
Since Republicans are expected to oppose uniformly, the only way for Democrats to pass through an evenly divided Senate is to get unanimous support from caucuses and protect it from filibuster. His support is important because it is to do so under budgetary rules. Allows you to pass a simple majority vote.
Schumaer has been working to rescue key elements of the plan that could meet the test, including a plan announced Wednesday to reduce the cost of prescription drugs. Manchin reiterated that such laws should focus on tax reform and drug prices, as well as efforts to reduce government bonds. The bill is expected to include climate and energy provisions, which have not yet been agreed, but are important priorities for the Democratic Party.
Democratic leaders hoping to pass the bill in the Senate this month are expected to officially announce the Medicare plan in the coming days, according to officials who disclosed preliminary details on the terms of anonymity. There is.
The rapid budgeting process that the party plans to use throughout the package, known as the Reconciliation, requires legislation to comply with the strict budget rules enforced by the Senator. The prescription drug law has been submitted to parliamentarians, and the Democratic Party will submit parts for tax increases and Medicare in the coming days.
The portion of Medicare that pays hospital invoices is covered primarily through a special trust fund that is covered by payroll tax. However, due to rising health care costs and an aging population, current income is not sufficient to permanently pay invoices for all Medicare hospitals. According to the latest reports from Medicare trustees, the fund will be exhausted in 2028 without new income or spending cuts.
The Democratic Party’s plan will extend the existing 3.8% net investment income tax to so-called pass-through income from companies that distribute profits to their owners. Many people who work for such companies, such as legal partners and hedge fund managers, earn high incomes, but avoid a 3.8 percent tax on most of them.
The new proposal applies only to co-filers, trusts, and real estate over $ 500,000, in accordance with Mr. Biden’s pledge not to raise taxes for people with an annual income of more than $ 400,000 and those with an annual income of less than $ 400,000. increase. .. This proposal is similar to Biden’s 2021 tax increase to offset the costs of a series of new spending programs aimed at helping workers and families, such as home health care and childcare.
Imposing a new tax on pass-through income will raise about $ 202.6 billion over a decade, according to a joint committee estimate on taxation provided to the Senate Democratic Party and reviewed by the New York Times. These funds go directly to the hospital insurance trust fund, which covers inpatient hospital care, some home care, and hospice care.
The Actuary Office of the Medicare & Medicade Service Center has informed Democratic staff that additional income will extend the solvency of the Hospital Trust Fund from 2028 to 2031.
“Medicare is the lifeblood of millions of older Americans, and Senator Manchin has always helped ensure that it remains a solvent,” Manchin spokeswoman said. Sam Lunyoung said. “He’s still optimistic and there’s a way to do just that.”
She warned that an overall deal on a broader climate, taxes and spending packages has not yet been reached. Some Democrats also want to include an extension of the extended health insurance reform subsidy that passed a partisan vote in 2021 with a $ 1.9 trillion pandemic aid package.
“Senator Manchin still has serious open concerns and there’s a lot to do before he thinks he can reach a deal he can sign,” Runyon said.
Manchin said he would support an additional tax increase, but the tax change would have to win the support of Arizona senator Kyrsten Sinema, a centrist who opposed many of her party’s first tax bills. It doesn’t become.
Many Democrats are anxious to deal with climate change before a midterm election that could change Washington’s balance of power, but Manchin, who has protected the state’s coal industry, continues to address the issue. I’m discussing.
At the heart of the climate plan is expected to be approximately $ 300 billion in tax credits to expand the development of clean energies such as wind, solar and battery storage. This is a very small plan that reflects the concession to Mr. Manchin. negotiation.
Negotiators are also considering tax credits to encourage the purchase of electric vehicles, but it is unclear whether Manchin will support such a provision.
Lisa Friedman Report that contributed.