HR-609-119
Referred to the House Committee on Ways and Means.
Sponsored by Lloyd Doggett (D-TX)
What it does
This bill would raise the income threshold at which the 3.8% net investment income tax (NIIT) applies — from $200,000 to $400,000 for individuals (and from $250,000 to $500,000 for joint filers). It would also expand the definition of income subject to the tax to include most business income not already subject to employment taxes, closing a gap that currently allows some high-income business owners to avoid the tax. Revenue collected from the NIIT would be formally directed into the Federal Hospital Insurance Trust Fund, which finances Medicare Part A (hospital coverage).
Who benefits
Medicare beneficiaries (approximately 67 million enrollees) who rely on Medicare Part A, which faces projected insolvency in the early 2030s. Lower- and middle-income taxpayers who would see the NIIT threshold double, removing them from the tax's reach. Future Medicare enrollees who would benefit from a more solvent trust fund. Hospitals and other Medicare-participating providers whose reimbursements depend on trust fund solvency.
Who is hurt
High-income individuals — particularly those earning above $400,000 ($500,000 for joint filers) — who would face a broader tax base, including business income not currently subject to the NIIT. Active partners in partnerships and S corporation shareholders who currently benefit from an exception that this bill would eliminate. Business owners whose working capital investment income is currently excluded but would no longer be. Estates and trusts subject to the expanded definition. Tax professionals and businesses that would face compliance costs from new IRS guidance requirements.
Supporters argue
Supporters argue that the current NIIT contains a well-documented loophole allowing high-income business owners — particularly active partners and S corporation shareholders — to avoid the 3.8% tax that wage earners already pay on equivalent income, creating an inequity the JCT and IRS have flagged for years. They contend that directing NIIT revenue to the Medicare Part A trust fund directly addresses the program's projected insolvency, extending solvency for millions of seniors without cutting benefits or raising premiums. Raising the threshold to $400,000 simultaneously protects middle-income taxpayers from the expanded base.
Opponents argue
Opponents argue that expanding the NIIT to cover active business income effectively imposes a new tax on business activity, which could reduce incentives for investment and entrepreneurship among high-earning business owners. They contend that the threshold increase does not offset the significantly broader tax base for those above it, and that tying a tax increase to Medicare solvency is a political framing that obscures the bill's net revenue-raising effect. Critics also argue that structural Medicare solvency requires broader program-level changes, and that a targeted tax increase delays rather than resolves the program's long-term fiscal challenges.
Constitutional context
The bill raises revenue and must originate in the House under the Origination Clause (Art. I, §7, cl. 1) — it has been referred to the House Ways and Means Committee, consistent with that requirement. The expanded tax on unrealized or business-sourced income could implicate the Sixteenth Amendment's income definition; after Moore v. United States (2024), the Supreme Court upheld the Mandatory Repatriation Tax but explicitly declined to resolve whether the Sixteenth Amendment requires "realization," leaving the outer boundaries of taxable income unresolved.
Checks and balances
Congress gains revenue authority through the expanded NIIT; the IRS is directed to issue implementing guidance, subject to judicial review; the Treasury Department administers trust fund transfers, with Congress retaining appropriations oversight.
Historical precedent
The original 3.8% Net Investment Income Tax was enacted as part of the Affordable Care Act (2010) and upheld in NFIB v. Sebelius (2012); this bill modifies that existing tax structure rather than creating an entirely new mechanism.