Summary#
The Medicare and Social Security Fair Share Act is a House bill that would amend the Internal Revenue Code and the Social Security Act. It would change payroll and investment-income taxes, with the stated goal of increasing funding for Social Security and Medicare. It has been introduced and referred to the House Ways and Means Committee; it is not law.
- It would subject wages and self-employment earnings above $400,000 to Social Security taxes, while leaving the band between the annual Social Security contribution-and-benefit base and $400,000 outside those taxes. It also changes the related rule for railroad retirement taxes.
- It would add a 1.2% Medicare hospital-insurance tax on wages and self-employment income above $400,000 for most individual filers, or $500,000 for joint filers. The separate-return threshold is half the joint-filer amount.
- For individuals above those income thresholds, it would broaden which income can be counted for the net investment income tax and add a 13.6% tax amount under the bill’s formula. For estates and trusts, it would raise the rate in that tax provision from 3.8% to 17.4% and broaden the income measure.
- It would direct net investment income tax revenue among the Social Security and Medicare hospital-insurance trust funds: 61% to the old-age and survivors fund, 10.3% to the disability fund, and 28.7% to the hospital-insurance fund.
What it means for you#
- Employees with wages above $400,000: The bill would add Social Security tax on the portion above $400,000. It would also add the 1.2% hospital-insurance tax above the applicable threshold. Employers would have withholding duties for the new hospital-insurance tax, with the employee responsible for amounts not withheld.
- Self-employed people: The bill would apply corresponding Social Security and hospital-insurance tax changes to self-employment income. The hospital-insurance threshold would be reduced by wages already counted for that tax.
- People with high incomes from investments or certain business and foreign income: The bill could increase the amount subject to net investment income tax. The new individual tax amount phases in as modified adjusted gross income rises above the threshold.
- Estates and trusts: The bill would raise the rate and broaden the income measure used for this tax provision.
- Other taxpayers: The bill does not directly change Social Security or Medicare benefit eligibility or benefit amounts.
Money#
No revenue estimate or public cost estimate is included in the supplied material.
- The bill would raise taxes on specified wages, self-employment earnings, and investment-related income. How much revenue it would raise is not stated.
- It directs some net investment income tax revenue to the named trust funds. It does not state how that money would affect future benefits or program finances.
- The bill does not appropriate money for a new program.
What is unclear#
- The bill’s payroll-tax changes would start in the first calendar year beginning after enactment; its investment-tax changes apply to tax years beginning after December 31, 2025. The bill has not been enacted, so the actual start date is unknown.
- The supplied material does not include the current Internal Revenue Code or Social Security Act. The bill’s amendments can be described, but their full interaction with current law could not be independently checked against those Acts.
- The bill does not estimate how many taxpayers would owe more, or how much additional tax they would pay.
- It does not explain how the broader “specified net income” rules would apply in every case. It directs the Treasury Secretary to issue guidance on some foreign-corporation distributions.
- The bill does not say how added revenue would change trust-fund finances or benefits.
Case for#
- The bill appears intended to raise revenue for Social Security and Medicare by taxing some high-income wages and investment-related income more heavily.
- A possible argument for the bill is that it would draw funding from more than one type of income, including investment-related income, and assign some of that revenue to the relevant trust funds.
- The bill sets income thresholds, so its new tax rules would focus on income above specified amounts rather than apply to all taxpayers.
Case against#
- One concern is that the bill adds several tax rules and expands the income counted under the investment tax, but supplies no estimate of the tax burden or revenue raised.
- The bill’s broader income measure and its coordination of wages, self-employment income, and investment income could make tax calculations more complex.
- It is unclear whether the added revenue would be enough to materially change trust-fund finances or affect benefits; the bill does not promise a particular result.