ACA 'Medicare Tax' Revenue Should Go to Medicare: Senior Citizens League
Revenue from a second ACA Medicare tax does go to Medicare.
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.
Congress created the tax with a provision in the Affordable Care Act. Former President Barack Obama signed in the two bills that created the ACA package in 2010.
The ACA also includes a second Medicare tax — an extra 0.9 percent point increase in the Medicare tax rate paid by individuals with annual income over $200,000 and couples with annual income over $250,000.
The administration of President Joe Biden has released a budget proposal that calls for sending net investment tax revenue to the Medicare Part A trust fund.
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