Senate Democrats reach agreement to close tax loophole in next step toward broader deal

By Jessica Dean and Ali Zaslav, CNN

Senate Democrats have finalized an agreement to close a tax loophole in order to extend the solvency of Medicare, according to a source familiar with the agreement, in another step forward on their economic and prescription drug package.

Senate Majority Leader Chuck Schumer is expected to submit the legislative text of the agreement to the Senate parliamentarian in the coming days.

The proposal would ensure owners of certain “pass-through” businesses would pay the 3.8% net investment income tax to fund health care and would apply to individuals who earn over $400,000 annually and joint filers who earn more than $500,000. According to a US Treasury report, Medicare is expected to be insolvent by 2028 without any changes.

This provision is part of a larger package Senate Democrats are working to finalize that would require support from all 50 Democratic senators and would be able to bypass the Senate filibuster using a specialized budget process called reconciliation. Previous negotiations on the more extensive Build Back Better plan broke down in February. This would be a scaled back of Democrats’ previous proposal.

On Wednesday, Schumer filed an agreement allowing Medicare to negotiate prescription drug prices. The two other key provisions of this current deal — energy and taxes — are still being negotiated by moderate Democratic Sen. Joe Manchin of West Virginia and Schumer.

CNN previously reported Schumer has privately told his caucus that he wants to bring a bill to the floor before the August recess if he can strike a deal with Manchin. The recent moves this week by Schumer signal his commitment to try and move forward with a bill as early as July, according to a source familiar with his thinking.

The-CNN-Wire
™ & © 2022 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.