Democrats want to tax high earners to protect Medicare solvency

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WASHINGTON (AP) — Senate Democrats want to raise taxes on some high earners and use the money to extend the…

WASHINGTON (AP) — Senate Democrats want to raise taxes on some top earners and use the money to expand Medicare solvency, the latest step in the party’s election-year bid to craft a scaled-down version of the package. economic crisis that has collapsed in the past year, Democratic aides told The Associated Press.

Democrats expect to submit legislative language on their Medicare plan to the Senate congressman in the coming days, aides said. It was the latest sign that Majority Leader Chuck Schumer, DN.Y., and Sen. Joe Manchin, DW.Va., might be heading for a compromise the party hopes to push through Congress this summer in the face of a strong Republican opposition. Manchin scuttled last year’s bill.

Under the latest proposal, individuals earning more than $400,000 a year and couples earning more than $500,000 should pay a 3.8% tax on their income from tax-advantaged businesses called pass throughs. Until now, many of them used a loophole to avoid paying this fee.

That would bring in about $203 billion over a decade, which Democrats say would be used to delay until 2031 a shortfall in the Medicare trust fund that pays for hospital care. This fund is currently expected to start running out of money in 2028, three years earlier.

Most US companies are intermediaries, which include partnerships and sole proprietorships and range from one-person law firms to some large corporations. Owners count profits as income when paying personal income tax, but these businesses do not pay corporation tax, which means they avoid paying two levels of tax.

Democrats also this week sent the House a separate 190-page document on the emerging Schumer-Manchin compromise that would lower prescription drug costs for patients and the government. Provisions include requiring Medicare to negotiate drug prices, limiting out-of-pocket expenses for beneficiaries to $2,000 a year, and increasing federal subsidies for copayments and premiums for certain low-income people.

As the November election for control of Congress nears, Democrats are hoping the two proposals will be a cure for a campaign season that so far looks bleak. Republicans are favored to win a majority in the House and could do the same in the Senate.

Democrats say both plans will show voters they are fighting to lower health care costs and protect the wildly popular Medicare program, positions they say will be dangerous for Republicans. Polls show widespread public concern over historically high inflation rates in recent months, supply chain issues and other economic issues that, along with President Joe Biden’s dismal approval ratings, are pushing Republican voters in the path of Republicans, according to the GOP.

Schumer and Manchin have been negotiating privately for weeks over a package that aides say could include about $500 billion in spending and tax credits, more than paid for with about $1 trillion in revenue and other savings . Schumer described the talks as productive but acknowledged that some issues remain unresolved.

Energy and environmental programs, corporate taxes, increases to the IRS budget to strengthen tax enforcement, and a renewal of soon-to-expire federal subsidies for people purchasing health insurance under the President Barack Obama’s health care is also under discussion, according to aides.

It is unclear what will come out of the talks. The aides described the latest proposals and the status of the negotiations only on condition of anonymity because they were not authorized to release the information by name.

The suggestions for progress emerged seven months after Manchin derailed a roughly $2 trillion 10-year social and environmental bill, dealing a blow to a cornerstone of Biden’s domestic agenda.

The Democratic-led House approved the measure in November, but Manchin abruptly announced that he could not support the legislation because of its cost and fears it would fuel inflation. Similar provisions lowering the prices of pharmaceuticals and increasing taxes for certain high-income people were included in this bill.

The West Virginian’s support remains crucial in the 50-50 Senate. Democrats are using special procedures that would allow them to pass the streamlined package over the expected unanimous opposition from the GOP with the deciding vote of Vice President Kamala Harris.

Democrats should unanimously support Medicare’s solvency and prescription drug plans, a Democratic aide said.

“Medicare is a lifeline for millions of America’s seniors, and Senator Manchin has always supported pathways to ensure it remains solvent. He remains optimistic that there is a pathway to get there” , said his spokesman Sam Runyon.

Senate Congresswoman Elizabeth MacDonough will have to certify that the provisions of the new bill meet the budget rules of the chamber. Last year, she ruled that language making it easier for immigrants to stay in the United States should be removed because it violated prohibitions on using special procedures to pass major policy changes.

Medicare has 64 million beneficiaries. Its trust fund covering hospital services, called Part A, is funded largely by taxes deducted from people’s paychecks.

This trust fund gained two years of solvency, through 2028, in last month’s report from the program’s board. He attributed the improvement to the economy’s recovery from the recession sparked by the coronavirus pandemic.

But Medicare and Social Security face long-term funding challenges, and administrators suggested lawmakers act “as soon as possible” to bolster them. Without congressional action, the Medicare hospital trust fund would only be able to pay 90% of its costs in 2028 and less thereafter, administrators said.

The proposal to raise taxes on some wealthier Americans would raise $203 billion over the next decade, according to AP-reviewed information that the Congressional Joint Committee on Taxation provided to Senate Democrats. Federal actuaries told Democrats that such funding would delay the trust fund deficit until 2031, according to another document.

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