Medicare and the Budget: Proposals for a Simple Tax Increase for Families Over 400000 Per Year, and Impact on the National Debt

The President has proposed a tax increase for people who make more than $400,000 per year, to extend the life of Medicare, and the budget proposal will be released on Thursday.

Over the next three decades, the Social Security system is scheduled to pay benefits $21 trillion greater than its trust fund will collect in payroll taxes and related revenues. The Medicare system is projected to run a $48 trillion shortfall. These deficits are projected to, in turn, produce $47 trillion in interest payments to the national debt. That is a combined shortfall of $116 trillion, according to data from the Congressional Budget Office. (To inflation-adjust these figures, trim by roughly one-third.)

There is no basis in the president’s argument that full benefits can be paid without raising taxes for 98 percent of families. Imagine that Congress let the Trump tax cuts expire, increased the top two tax brackets to 70 and 74 percent, imposed a wealth tax of 8 percent on assets over $10 billion, and applied social security taxes to all wages. Combined federal income, state and payroll marginal tax rates would approach 100 percent for wealthy taxpayers, and America would face among the highest wealth, estate and corporate tax rates in the developed world.

The president’s budget, which is usually ignored by Congress and has the power of purse, is this year being reconsidered due to a deadline on raising the debt ceiling.

In an NPR poll last month, seven in 10 people, including a majority of Republicans, said they want their representatives to compromise to find solutions when it comes to the budget. According to the results of the survey, half of the people said they liked a solution that cuts programs and services, while the other half preferred an increase in taxes and fees.

Biden proposed to increase the Medicare tax rate to 5% for people making more than $400,000 in an op-ed he wrote in the New York Times.

Biden wrote in the Times that he is confident that “an overwhelming majority of Americans support” lowering drug prices while extending Medicare’s solvency.

Biden said Medicare has been a “rock-solid guarantee” for retired Americans and said his proposals were “common-sense changes” that most people would support.