What to Know in Washington: Biden Eyes Tax Hike to Fund Medicare

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President Joe Biden’s budget will propose hiking payroll taxes on Americans making over $400,000 per year and allowing the government new power to negotiate drug prices as part of an effort the White House says will extend the solvency of a key Medicare program for another quarter century.

“The budget I am releasing this week will make the Medicare trust fund solvent beyond 2050 without cutting a penny in benefits,” Biden said Tuesday in an op-ed published in The New York Times shortly before the announcement. “In fact, we can get better value, making sure Americans receive better care for the money they pay into Medicare.”

Photographer: Andrew Harrer/Bloomberg
Biden delivering remarks in Washington on Monday.

The president’s budget, which will be released on Thursday, proposes raising Medicare taxes from 3.8% to 5% on annual income above $400,000, and eliminating a loophole business owners and higher-earners can exploit to avoid additional taxes, according to a White House fact sheet. The plan would also help bolster Medicare reserves through some $200 billion in prescription drug reforms over a decade by allowing the program to negotiate costs on more medications, and sooner, after they come to market.

The Medicare portion of the budget plan was announced by the White House on Tuesday and reported earlier by the Washington Post. The moves are part of a concerted White House effort ahead of looming negotiations over the debt ceiling and government funding, where Republicans vow to seek deep cuts to federal spending.

Biden’s plan has little chance of becoming law, especially after Republicans took control of the House this year, but the proposal is an important signpost for negotiations over federal government spending, and it offers the president a chance to publicly outline his priorities. Read more from Justin Sink and Josh Wingrove.

Join Bloomberg Government’s budget experts on Friday for a deep dive into Biden’s budget request for fiscal 2024 and what it means with a divided Congress. Learn more here .

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To contact the reporter on this story: Brandon Lee in Washington at blee@bgov.com

To contact the editors responsible for this story: Michaela Ross at mross@bgov.com; Giuseppe Macri at gmacri@bgov.com

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