Democrats want to tax high earners to protect Medicare’s solvency | business news

By Alan Fram Associated Press

WASHINGTON (AP) — Senate Democrats want to raise taxes on some high-income earners and use the money to extend Medicare’s solvency, the latest step in the party’s election-year bid to craft a stripped-down version of the package. economy that collapsed last year. year, Democratic advisers told The Associated Press.

Democrats expect to present legislative language on their Medicare plan to the Senate legislator in the coming days, aides said. It was the latest sign that Majority Leader Chuck Schumer, DN.Y., and Sen. Joe Manchin, DW.Va., may be closing in on a compromise the party hopes to push through Congress this summer despite 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 would have to pay a 3.8% tax on their profits from tax-advantaged businesses called pass-throughs. Until now, many of them have been using a loophole to avoid paying that tax.

That would raise an estimated $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. That fund is currently projected to start running out of money in 2028, three years early.

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Most US companies are transfer companies, which include partnerships and sole proprietorships and range from one-person legal practices to some large corporations. Owners count profits as income when they pay individual income taxes, but such businesses don’t pay corporate taxes, meaning they avoid paying two tiers of tax.

This week, Democrats also sent the congressman a separate 190-page article from the emerging Schumer-Manchin compromise that would lower prescription drug costs for patients and the government. The provisions include requiring Medicare to negotiate drug prices, capping beneficiaries’ out-of-pocket costs at $2,000 a year and increasing federal subsidies for copays and premiums for some low-income people.

With the November election for control of Congress approaching, Democrats hope the two proposals will be a remedy for a campaign season that has so far looked bleak. Republicans are favorites 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 popular Medicare program, positions they say Republicans would be dangerous to oppose. Polls show widespread public alarm over historically high inflation rates in recent months, supply chain problems, and other economic problems that, along with President Joe Biden’s dismal approval ratings, are pushing voters to your favor, says the Republican Party.

Schumer and Manchin have been privately negotiating for weeks on a package that advisers say could include about $500 billion in spending and tax credits, more than was paid for by 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, IRS budget increases to strengthen tax enforcement, and renewal of soon-to-expire federal subsidies for people who buy health insurance under the then president’s health care law Barack Obama are also under discussion, attendees say.

What will emerge from the talks remains uncertain. The attendees described the latest proposals and the status of negotiations only on condition of anonymity because they were not authorized to release the information by name.

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

The Democrat-led House of Representatives passed the measure in November, but Manchin abruptly announced that he could not support the legislation because of its cost and his concerns that it would fuel inflation. There were similar provisions in that bill that lowered the prices of pharmaceuticals and raised taxes for some high-income people.

West Virginian support remains crucial in the 50-50 Senate. Democrats are using special procedures that would allow them to pass the reduced package over expected unanimous Republican opposition with Vice President Kamala Harris’s tie-breaking vote.

Democrats are expected to unanimously back Medicare creditworthiness and prescription drug plans, a Democratic adviser said.

“Medicare is a lifeline for millions of older Americans, and Senator Manchin has always supported ways to ensure it remains solvent. He remains optimistic that there is a way to do just that,” spokesman for him Sam Runyon said.

Senate Rep. Elizabeth MacDonough will have to certify that the new bill’s provisions adhere to the chamber’s budget rules. Last year, she ruled that language making it easier for immigrants to stay in the US should be removed because it violated prohibitions against using special procedures to enact significant policy changes.

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

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

But both Medicare and Social Security face long-term funding problems, and the trustees suggested that lawmakers act “sooner rather than later” to strengthen them. Without congressional action, the Medicare hospital trust fund could pay only 90% of its costs in 2028 and less thereafter, the trustees said.

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

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