Senator Manchin might be terrible on climate policy or raising taxes on the wealthiest Americans, but he does not appear to have thrown a wrench into a policy that would strengthen the Medicare Trust Fund, extending its solvency three years. Jean Ross and Seth Hanlon report for the Center for American Progress on a provision agreed to in the US Senate reconciliation package that would close a Medicare loophole and raise more than $200 billion in revenue for Medicare over the next 10 years.
The reconciliation act provision is less a tax increase and more a tax equalizer, requiring people who have in the past dodged Medicare taxes to pay the taxes that working people and small-business owners already pay.
Right now, employers and workers split a payroll contribution of 2.9 percent. The Affordable Care Act (ACA) added an additional 0.9 percent to that pot for high-income individuals. The ACA also applied a 3.8 percent contribution to net investment income, unearned income like capital gains, dividends and interest and business income.
But, the ACA included a tax loophole for people whose income comes from an S corporation, a limited liability company or limited partnership and who participate actively in these businesses. Partners in private equity funds, doctors, lawyers, entertainers and others are among these individuals. The provision in the reconciliation package would close this loophole for individuals with income over $400,000 and couples with income over $500,000 and make the tax code a bit fairer.
Almost everyone who would pay this new tax is in the top 1 percent of income earners, with annual income above $680,000.
As of now the Medicare Trust Fund will start paying out more than it takes in in 2028. This provision would extend its solvency to 2031.
Here’s more from Just Care:
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