“To amend the Internal Revenue Code of 1986 to increase funding for Social Security and Medicare.”
No CRS summary available for this bill.
This section modifies the wage base for Social Security taxes imposed under IRC §§3101(a) and 3111(a) to $400,000 (from the contribution and benefit base under SSA §230, which is less than $400,000), applies the change to railroad retirement taxes under IRC §3231(e)(2)(A), and adds special rules for successor employers under new IRC §3121(aa). (Thus, wages between the contribution and benefit base and $400,000 become subject to the 12.4% combined Social Security tax rate, expanding the tax base for Old-Age, Survivors, and Disability Insurance benefits.) It also imposes a new 1.2% employee Medicare tax under IRC §3101(b)(3) on wages exceeding $500,000 ($250,000 married filing separately; $400,000 all others), with employer withholding limited to wages over $400,000 from that employer (disregarding spousal wages) and any remainder paid directly by the employee under new IRC §3102(g). The changes apply to remuneration paid and taxable years beginning on or after January 1 of the first calendar year after enactment.
This section (1) revises the maximum amount of net earnings from self-employment subject to the 12.4% Social Security tax (under IRC §1401(a)) to $400,000 in combined wages and self-employment income when the statutory contribution and benefit base is lower (e.g., $168,600 in 2024); and (2) imposes a new 1.2% Medicare tax (under new IRC §1401(b)(3)) on self-employment income exceeding $500,000 ($250,000 married filing separately; $400,000 other filers), with thresholds reduced (but not below zero) by wages taken into account under the parallel employee tax in IRC §3101(b)(3); makes the new tax nondeductible in computing net earnings from self-employment (amending IRC §§164(f) and 1402(a)); and includes a conforming coordination amendment (IRC §1401(b)(2)). Applies to taxable years beginning on or after January 1 of the first calendar year after enactment.
This section modifies the net investment income tax (NIIT, i.e., the 3.8% surtax on certain unearned income that funds Medicare Part A through the Federal Hospital Insurance Trust Fund) as follows: (1) For individuals with modified adjusted gross income exceeding the high-income threshold ($400,000 single/$500,000 joint/$200,000 married filing separately, from $200,000/$250,000/$125,000), expands the tax base under IRC §1411(a)(1) to the greater of specified net income (i.e., broader net investment income that disregards certain active business and passive activity exclusions) or net investment income, phases in the expansion over $100,000 of excess income ($50,000 married filing separately), and adds a 13.6% rate bracket on the lesser of that amount or excess modified adjusted gross income over the threshold (resulting in a maximum combined rate of 17.4%, from 3.8%). (2) Increases the NIIT rate for estates and trusts to 17.4% (from 3.8%) on the greater of undistributed specified net income or undistributed net investment income. (3) Revises net investment income computation rules by excluding items subject to Medicare payroll taxes (i.e., self-employment income under IRC §1401(b) and wages under §§3101(b)/3201(a)), disallowing net operating losses, including certain foreign income (e.g., under §§951/951A), and clarifying treatment of certain previously taxed foreign earnings. (4) Allocates 71.3% of NIIT revenues to the Federal Old-Age and Survivors Insurance Trust Fund (from 0%, with remainder previously directed solely to the Federal Hospital Insurance Trust Fund).