President Joe Biden will propose raising taxes for Americans earning more than $400,000 to boost funding for Medicare and expand the program’s ability to negotiate lower prescription drug costs in an effort to mitigate an impending funding crisis unload.
Biden, who will publish his full budget proposal Thursday in Philadelphia, said he will propose three major changes, including the tax increase and new rules to reduce the cost of prescription drugs.
The Democratic president outlined his plan Tuesday in a guest essay in The New York Times, writing that “Medicare is more than a government program. It’s the ironclad guarantee that Americans have counted on to be there for them when they retire.”
Biden’s proposal would increase the Medicare tax rate created by the Affordable Care Act from 3.8 percent to 5 percent for all Americans earning more than $400,000 a year, including salaries and capital gains.
“This modest increase in Medicare contributions from those with the highest incomes will help keep the Medicare program strong for decades to come,” Biden writes in the Times. The plan also aims to close what the White House describes as loopholes that allow some income earners to evade Medicare taxes.
President Joe Biden (pictured Sunday) will propose raising taxes on Americans earning more than $400,000 and cutting what Medicare pays for prescription drugs in an effort to solve a looming funding crisis
Since forecasters have warned that Medicare will not be able to pay out the promised benefits within five years, Biden says his proposal will support the program for at least another 25 years.
“The president’s budget extends the life of the Medicare Trust Fund by at least 25 years,” the plan said, according to the Washington Post. “It achieves these benefits without cuts — indeed, while reducing costs for Medicare beneficiaries.”
In addition to taxes, Biden wants to expand Medicare’s ability to negotiate drug costs, which began with the Inflation Reduction Act. He signed the far-reaching legislation last year.
The changes would help create a major trust fund that pays for Medicare, which provides health care to older adults. According to the White House, the changes would keep the fund solvent until the 2050s, about 25 years longer than currently expected.
More changes would be made to Medicare benefits. Biden wants to limit cost-sharing for some generics to as little as $2. The idea would lower out-of-pocket costs for treating hypertension, high cholesterol and other conditions.
In addition, the budget would end cost-sharing for up to three mental health or behavioral health visits per year.
On Monday, Biden had hinted that tax increases for the wealthy would be central to his budget plan.
Addressing a firefighter group as representatives of everyday, working Americans, he said, “A lot of what we do is about your right to be treated with fairness, dignity, and respect.”
‘Part of that is creating a fair tax system. We can make all these improvements and still reduce the deficit if we start making people pay their fair share,” he said in remarks to the International Association of Fire Fighters.
Democrats and Republicans are now battling to show the public which party is more fiscally responsible. It is an important test, as the White House and Congress must agree to increase the government’s borrowing power this summer or the US could default and plunge the economy into a severe recession.
R-Texas House Budget Committee chair Jodey Arrington, who drafts his party’s fiscal plan, has said Biden’s plans will push inflation up.
“We’re going to see a budget that keeps raising taxes and spending tax dollars, and as a result, this 15th consecutive month of inflation continues,” Arrington said.
Biden laid the groundwork for his upcoming budget last month in his State of the Union address and other recent speeches. He has pledged to reduce deficits by a combined $2 trillion over 10 years, strengthen Social Security and Medicare, and limit tax increases to people earning more than $400,000.
His plan is in some ways much more ambitious than what he proposed in 2021, when his budget would have reduced debt by $1 trillion over projections over 10 years.
Jodey Arrington, chair of the House Budget Committee (pictured), R-Texas, who drafts his party’s fiscal plan, has said Biden’s plans will push inflation higher
House Speaker Kevin McCarthy, R-Calif., has called for the country to move towards a balanced budget while leaving Social Security and Medicare untouched. But McCarthy has kept a poker face on how the GOP might do that.
House Republicans have struggled to rally behind a budget proposal of their own and are unlikely to release a blueprint unless and until they have 218 votes to a majority to approve it.
Setting its own marker, the far-right Freedom Caucus will present its priorities that will return spending to fiscal 2022 levels and put the federal budget on a path to balance. It pushed for those policies as part of the long-running fight to make McCarthy House Speaker, but their plan would require painful cuts that are too harsh for other Republicans.
In brief remarks last week, McCarthy said it could be two months before House Republicans have a budget proposal. He told The Associated Press, “We fell behind because of the president.”
So instead, Republicans in Congress this week will highlight the tax increases Biden will outline in his budget proposal, betting that their arguments will sway voters at a time when inflation continues to hit consumers’ wallets. That’s according to GOP aides who insisted on anonymity to discuss their strategy.
With a view to 2024, Biden will present his election year budget plan this week in must-see Pennsylvania instead of the usual White House setting.
Biden’s trip to Philadelphia on Thursday is a sign that the president’s budget proposal is part of a larger political push to connect with voters. He tells them that taxes on the wealthy can reduce federal deficits and save on popular programs like Social Security and Medicare.
Pennsylvania provides a solid test of the two competing ideological visions for the country. Biden won the state by about a percentage point in 2020, a decidedly narrow victory. His appearance Thursday will be his 23rd trip since becoming president.
In the 2022 Pennsylvania Senate race, Democrat John Fetterman won by about five points, despite voters’ concerns about the U.S. economy linked to high inflation.
White House press secretary Karine Jean-Pierre said Pennsylvania is “very close to Biden’s heart” and that the president, who was born in Scranton, sees it as a “second home” to Delaware, where he served as a senator .
When Biden travels to Pennsylvania and elsewhere, Jean-Pierre said, “It’s an opportunity for the president to talk directly to the American people.”
In addition to taxes, GOP lawmakers are targeting the White House pledge to further cut the deficit, pointing to the massive spending cuts that Democrats passed during the first two years of Biden’s presidency. In particular, according to one of the Republican aides, the Republican senators intend to advocate that with government revenues already so high, Democrats should cut or cut programs instead of raising taxes to pay for even more spending.
Jim Carter, a director of the conservative America First Policy Institute, said Congress typically ignores presidential budgets and he expects Biden’s plan to be more of a “liberal messaging document.”
“The federal government doesn’t have a revenue problem,” Carter said. “It has a spending problem and Joe Biden’s budget won’t do anything to curb it.”
R-Texas House Budget Committee Chair Jodey Arrington released a list of more than $750 billion in potential cuts last month. Topping the list was the repeal of Biden’s executive order, which offered some student debt forgiveness, which would return about $400 billion to the federal treasury.
Arrington also included withdrawing money tied to what he called a “wake up” agenda as the GOP’s cultural coverage has merged with the economic one. He would cut $60 billion from the EPA that would go for environmental justice programs and get back $3.6 million intended to extend Georgia’s Michelle Obama Trail.
Phillip Swagel, director of the nonpartisan Congressional Budget Office, advised Monday that projected deficits would need to be cut by $5 trillion over the next decade to match the 50-year historical average.
“Bringing primary deficits back to their historical average is not a CBO recommendation,” Swagel wrote as a caveat.
As Swagel outlined it, the political compromises are clear. About $670 billion to $1.2 trillion could be raised by lifting caps on the payroll taxes that fund Social Security. But that would be a tax increase. The GOP opposes tax increases, and the increase would also violate Democrat Biden’s pledge to raise taxes only on those earning more than $400,000.