Medicare and Social Security Fair Share Act
Medicare and Social Security Fair Share Act aims to boost funding for Social Security and Medicare by changing how several taxes apply to higher-income earners and to self-employment income, and by directing more revenue into the trust funds that support these programs. Key changes include raising the effective wage base for Social Security payroll taxes up to $400,000 (where the base is currently well below that amount), adding an extra 1.2% tax on wages above specified high-income thresholds, and applying a similar higher-rate Medicare/self-employment tax to very high earners. The bill also expands the Net Investment Income Tax (NIIT) to more high-income individuals and dramatically increases the tax rate for trusts and estates. In addition, the bill directs a substantial share of these taxes to the Old-Age and Survivors Insurance, Disability Insurance, and Hospital Insurance (Medicare Part A) trust funds. These changes would take effect for years beginning after December 31, 2025. The bill would be implemented through adjustments to the Internal Revenue Code, including special rules for successor employers, coordination between payroll and high-income taxes, and a reallocation mechanism that bases funding for SSA and Medicare on the revised tax receipts. The net effect is to raise taxes on higher-income individuals and certain types of income to expand program funding beginning in 2026 and beyond.
Key Points
- 1Upward adjustment of the Social Security wage base to fund Social Security up to $400,000 per employer-employee relationship in years when the contribution and benefit base is below $400,000; includes a “successor employer” rule to treat prior-year wages from a predecessor as paid by the successor for purposes of the base.
- 2New 1.2% “further additional hospital insurance tax” on wages above high-income thresholds ($500,000 for joint filers, $400,000 for other filers, with rules for separate returns) and related collection provisions; applies to both wages and the payer/withholding framework, with certain spouse-related adjustments.
- 3Modifications to the self-employment tax to align with the higher thresholds and to apply an additional 1.2% tax on self-employment income above the same high-income thresholds; removes a deduction for the additional tax and includes coordination with the FICA framework.
- 4Expanded taxation on unearned income via NIIT: new provisions to tax the greater of specified net income or net investment income for high-income individuals, with a phased-in increase and higher high-income thresholds; expands treatment of certain foreign and trust income and clarifies computation.
- 5Revenue transfers to SSA and Medicare trust funds: the bill reallocates a large share of 1411 taxes to Old-Age and Survivors Insurance (OASI), Disability Insurance (DI), and Hospital Insurance (Medicare Part A) funds (71.3%, 10.3%, and 28.7% respectively, with adjustments based on tax returns), effective for taxable years beginning after December 31, 2025.