Medicare and Social Security Fair Share Act
Medicare and Social Security Fair Share Act would significantly raise and reallocate federal payroll and investment taxes to fund Social Security and Medicare. The core idea is to expand the amount of income subject to Social Security payroll taxes (by raising the wage base up to $400,000 for Social Security funding), add a new 1.2% hospital insurance (Medicare Part A/B) tax on very high wages, and extend similar high-income tax considerations to self-employment income and net investment income. The bill also restructures how revenue from these taxes is allocated to the Social Security and Medicare trust funds, directing a substantial share of the new and existing taxes to OASI (Old-Age and Survivors Insurance), DI (Disability Insurance), and HI (Hospital Insurance). If enacted, the changes would take effect for taxable years beginning after December 31, 2025 (i.e., starting in 2026). In short, it is an effort to broaden the tax base and steepen the tax bite on high-income individuals and some self-employed earners, with a formal plan to channel the additional revenue directly into the Social Security and Medicare trust funds.
Key Points
- 1Raises the wage base for Social Security funding up to $400,000 in years when the Social Security contribution and benefit base is below $400,000, and introduces a special rule for successor employers to prevent benefit-wage manipulation in corporate acquisitions (including application to railroad retirement taxes).
- 2Imposes a new 1.2% hospital insurance tax on wages above high-income thresholds (e.g., $500,000 for joint filers, $400,000 for others, with half-threshold for certain married filing separately filers), with specific collection rules and employer withholding limitations.
- 3Modifies the self-employment tax (SECA) to align with the adjusted wage/base concept up to the $400,000 threshold and adds a parallel 1.2% HI tax on high-income self-employment net earnings, coordinated with the FICA system; removes certain deductions tied to the new tax; applies starting in 2026.
- 4Expands the net investment income tax (NIIT) by introducing a higher rate bracket (and a new concept called “specified net income”) for high-income individuals, with a phase-in for increases; converts the trust/estate NIIT to a much higher rate (17.4%) on the greater of undistributed specified net income or undistributed net investment income; provides detailed rules for calculating “specified net income.”
- 5Redirects a defined share of NIIT-like revenue to the Social Security and Medicare trust funds (71.3% to the Old-Age and Survivors Trust Fund, 10.3% to the Disability Insurance Trust Fund, and 28.7% to the Hospital Insurance Trust Fund), using the Treasury’s tax return data to determine the amounts; applies to taxable years beginning after December 31, 2025.