Democrats Aim to End 'Ridiculous Giveaway' to Rich to Boost Medicare

Progressives welcomed Thursday's news that Senate Democrats are finalizing a plan to raise taxes on some high-income households to bolster Medicare.

As The Associated Pressreported, citing unnamed Democratic aides: "Under the latest proposal, people earning more than $400,000 a year and couples making more than $500,000 would have to pay a 3.8% tax on their earnings from tax-advantaged businesses called pass-throughs. Until now, many of them have been using a loophole to avoid paying that levy."

"Pass-throughs have been abused by wealthy Americans for years to reclassify their income and avoid paying the taxes they rightfully owe."

The modest tax hike on the rich owners of pass-through firms would raise an estimated $203 billion in revenue over a decade, which would be used to shore up Medicare--a program that analysts say is financially strong despite constant right-wing fearmongering.

"Pass-throughs have been abused by wealthy Americans for years to reclassify their income and avoid paying the taxes they rightfully owe," Morris Pearl, chair of Patriotic Millionaires, said in a statement. "The Democratic plan to apply the investment income surtax to wealthy pass-through business owners is an important step in the right direction toward fixing this problem and making rich people like me pay our fair share."

A majority of enterprises in the U.S.--ranging from one-person law offices to some large companies--are pass-throughs. Proprietors of these businesses count profits as income when they pay individual taxes but are exempt from corporate taxes.

"Voters are sick and tired of the rich and powerful playing by a different set of rules," said Pearl. "This change would close a ridiculous giveaway to only the richest Americans, and reinvest the windfall back into the American public."

"This moves us closer to fixing the out-of-control wealth inequality that plagues our nation, but there's still a lot of work to be done," he added. "Democrats should follow this change with more aggressive changes to make our tax code work for all Americans, not just the rich."

The proposed tax reform and Medicare funding initiative--part of the party's last-ditch effort to pass a scaled-backed economic package through the filibuster-proof budget reconciliation process before November's pivotal midterms--reportedly has the backing of right-wing Democratic Sen. Joe Manchin (W.Va.), who played a decisive role in torpedoing the more wide-ranging Build Back Better Act last year.

Senate Majority Leader Chuck Schumer (D-N.Y.) is expected to submit legislative text on the tax measure to the chamber's parliamentarian--an unelected official tasked with opining on whether bill provisions comply with the esoteric rules of budget reconciliation--in the coming days.

Earlier this week, Senate Democrats--including Manchin, whose vote is needed in a 50-50 Senate with unified Republican opposition--agreed on a separate plan that would allow Medicare to negotiate the prices of certain prescription drugs directly with pharmaceutical giants.