![]() Further, sole proprietorships - which constitute the vast majority of small businesses - already pay Medicare self-employment taxes on all their income. Nearly all small business owners have less than $400,000 in profits. Small businesses are not the focus of this proposal. Pass-through income is reported on the individual income tax returns of the business owners and is not subject to the corporate income tax.)Ĭlosing this loophole would limit inefficient gaming, affect only a small share of high-income business owners, and treat all pass-through business owners equally. (The Medicare tax comprises a 2.9 percent tax on all earnings plus an additional 0.9 percent tax on earnings over $200,000 for single taxpayers and $250,000 for couples. First, for households with more than $400,000 in income, the plan would close a loophole that allows some pass-through business income to avoid both the 3.8 percent Medicare tax on wages and self-employment income and a parallel 3.8 percent net investment income tax (NIIT) on most unearned income. The Medicare solvency package has three major components. ![]() The plan raises revenues in a progressive manner and deserves prompt action by Congress. Strengthening Medicare Financingįoremost among the budget proposals is a plan to extend the solvency of Medicare’s Hospital Insurance (HI) trust fund by at least 25 years. The budget also contains additional proposals to make Medicare less costly and improve benefits. By modestly raising taxes on high-income people and reducing drug prices, the budget shores up Medicare’s financing and lowers beneficiaries’ costs. The President’s budget for fiscal year 2024 contains several important proposals to protect and strengthen Medicare. ![]()
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