February 14, 2023

The other half would come from current tax collections that are going to the general fund but were originally intended for the Medicare Trust Fund. [...] 34 does the same by ending the ability of certain wealthy business owners to dodge both the 3.8% Net Investment Income Tax (NIIT) and the Self-Employment Contribution Act (SECA) tax which, with the 0.9% extra Medicare tax on higher incomes, is also 3.8%. [...] However, the owners of limited partnerships and S corporations, which are not subject to the corporate income tax, may be able to avoid the NIIT if they are actively involved in the business. [...] Because closing the NIIT loophole would only apply to the wealthiest business owners, over 88% of the tax would be paid by the highest-income 1%, or those making over $885,000 a year, according to the Tax Policy Center. [...] Due to reconciliation rules, the revenue from the NIIT was unable to go directly into the Medicare Trust Fund as intended as part of the Affordable Care Act.