Changes in Medicare Tax on High-Income People Represent Sound Additions to Health Reform — Center on Budget and Policy Priorities

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By Chuck Marr

The President’s health reform plan would raise the Medicare tax rate for single filers with incomes over $200,000 and married filers with incomes over $250,000 — a provision that was included in the Senate-passed health bill — and also would extend this tax to the unearned income these affluent households receive such as income from capital gains, dividends, and royalties. These proposals, which would help finance the expansion of health coverage to more than 30 million Americans, would affect only U.S. households at the very top of the income scale while improving tax equity and economic efficiency.

These provisions would affect only the 2.6 percent of U.S. households with the highest incomes, according to the Urban Institute-Brookings Institution Tax Policy Center.[1] The Medicare taxes that the other 97.4 percent of Americans pay would remain unchanged. Among elderly households, only the top 2.2 percent would be touched, with the other 97.8 percent remaining unaffected.

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