We're serious. Recently enacted income tax cuts will likely be
the first casualty of Medicare "reform" if it pays for prescription
drugs, Heritage Foundation tax expert Daniel Mitchell notes in a
Here's how your tax cuts die: Enacted in 2001 and 2003, the tax
cuts are set to expire in 2010 and 2008, respectively. Shortly
after that, the first wave of baby boomers will likely
retire-adding millions to the Medicare program, which already
serves 40 million.
No problem at first, but Mitchell finds a catch: Medicare currently
operates at a deficit because it spends more than what it gets
through taxes. When you add a prescription drug benefit, one
government study says that deficit will balloon as Medicare needs
more taxes to pay for the needs of more patients-projected to be 80
million by 2030.
In other words, not only will Congress have a hard time extending
the tax cuts, but the costs associated with Medicare will put them
under pressure to enact new tax increases.
What kind of increases? If Medicare pays 75 percent of prescription
drugs, its overall deficit will consume about a third of income
taxes in 2026. In 2042, it will be more than half.
Add government's other expenses, such as defense and Social
Security, and you can kiss current and future tax cuts goodbye.
Mitchell says such burdens will make it "enormously" difficult for
politicians to keep taxes low to, say, boost a sluggish economy. Or
simply give you your money back.
Read more of Mitchell's study and other Medicare research
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