What You Need to Know
- The 3.8% net investment tax is one of two Medicare taxes included in the ACA.
- The tax could generate $27.5 billion in revenue this year.
- The revenue flows into the general fund.
The Senior Citizens League is trying to get attention for federal budget proposals that could move revenue from the 3.8% net investment tax into the Medicare Part A hospitalization plan trust fund.
Actuaries predict the Medicare Part A trust fund will become insolvent around 2024. Projections show the fund needs about $515 billion more revenue increases and spending cuts over the next 10 years to come into balance.
Money from the 3.8% tax now flows in the U.S. Treasury Department’s U.S. general fund. The tax will generate about $27.5 billion for the fund this year.
“Now those revenues are needed by the Medicare Part A Hospital Insurance Trust Fund,” according to Mary Johnson, a Medicare policy analyst for The Senior Citizens League.
3.8% Tax History
The net investment tax imposes a 3.8 percentage point increase in the tax rate for the net investment income on high-income taxpayers.