AP Photo/Andrew Harnik
- President Joe Biden is gearing up to release his budget, and is already giving one details on one proposal.
- His budget would slightly raise taxes on those earning over $400,000 to help fund Medicare.
- His proposal would bring down prescription drug prices, with those savings helping bolster the fund.
President Joe Biden's plan to lower the deficit and keep Medicare benefits in the pockets of Americans is becoming clearer — and, according to the White House, it looks like Biden is eyeing hiking taxes on some high-earners to make up the difference.
Included in Biden's budget, which is set to be released on Thursday, is a provision to raise the Medicare tax rate from 3.8% to 5% for those earning over $400,000 a year. The proposal will include unearned income like capital gains, rather than just wage and salary income, which will target a key way that high-earners make money from assets, like real estate and stocks, and the value that they accrue — all of which is generally taxed at far lower rates than the paychecks most Americans receive.
Biden is also aiming to close loopholes that some high-earners and business earners use to get out of paying Medicare taxes altogether, resurrecting a proposal from Senate Democrats to levy taxes on "pass-through businesses," which do not pay corporate income taxes, with money coming instead instead "passing through" to the business owners to be taxed as income.
Biden's budget will also aim to lower prescription drug prices even further, drawing on Medicare's new power under the Inflation Reduction Act to negotiate those prices for a wider variety of drugs, and kick off negotiations as soon as drugs are available. That newfound negotiation power, coupled with a requirement that drug companies and commercial health insurance have to pay out rebates if they raise their prices faster than inflation, will bring in $200 billion in savings over the next decade, according to the White House.
Altogether, the White House said, that will keep the Medicare Trust Fund solvent for at least 25 years.
"For decades, I've listened to my Republican friends claim that the only way to be serious about preserving Medicare is to cut benefits, including by making it a voucher program worth less and less every year. Some have threatened our economy unless I agree to benefit cuts," Biden wrote in a New York Times op-ed on his budget. "Only in Washington can people claim that they are saving something by destroying it."
Currently, according to the Social Security and Medicare Boards of Trustees, Medicare's Hospital Insurance (HI) Trust Fund is set to be insolvent by 2028. The Congressional Budget Offices estimates that the fund will be exhausted by 2030.
The future of Medicare and Social Security are currently being hotly debated, as Democrats and Republicans prepare to square off over the budget. Republicans have eyed using cuts to Social Security and Medicare as a bargaining chip to agree to raise the debt ceiling and avert a financial crisis, although Speaker of the House Kevin McCarthy has said those cuts are off the table.
The current name of the budgetary game is reducing the deficit, something both parties have indicated they're open to, but trying to balance the books without touching Social Security, Medicare, or defense spending would mean deep, systemic cuts across pretty much all of government.