“A bill 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 maximum wage base for Social Security payroll taxes and imposes a new Medicare payroll tax on high-wage earners, applicable to remuneration paid and taxable years beginning on or after January 1 of the first calendar year after enactment. (1) Social Security taxes.—For taxes imposed by IRC §§3101(a) and 3111(a) funding Old-Age, Survivors, and Disability Insurance (OASDI) benefits, this section raises the maximum wage base to $400,000 (from the contribution and benefit base under SSA §230, $168,600 for 2024) in any calendar year when the SSA-determined base is below $400,000. It includes conforming rules for successor employers (i.e., crediting a predecessor's wages toward the $400,000 cap) and a parallel change for railroad retirement taxes. (2) Medicare taxes.—This section imposes a new 1.2% employee tax under IRC §3101(b)(3) on wages exceeding $500,000 (joint return), $250,000 (married filing separately), or $400,000 (other cases), in addition to the existing 1.45% Medicare tax and 0.9% Additional Medicare Tax. Employer withholding under IRC §3102 applies only to wages exceeding $400,000 from that employer (disregarding the spouse's wages), with any unwithheld tax paid directly by the employee.
This section revises the maximum amount of an individual's net earnings from self-employment subject to the Old-Age, Survivors, and Disability Insurance (OASDI) portion of the self-employment tax (12.4%) to $400,000 (from the contribution and benefit base under the Social Security Act, when lower than $400,000), coordinated with wages paid to the individual. (As background, the OASDI self-employment tax generally applies only up to the annual Social Security wage base, such as $168,600 in 2024; thus, this change increases the maximum taxable amount for self-employed individuals when the wage base is below $400,000.) The section also (1) imposes a further additional Hospital Insurance (Medicare) self-employment tax of 1.2% on such earnings exceeding $500,000 (joint return), $250,000 (married filing separately), or $400,000 (all others)—reduced by wages subject to a parallel tax under FICA; (2) denies a deduction for this additional Medicare tax; and (3) makes related technical corrections. The changes apply to taxable years beginning on or after January 1 of the first calendar year after enactment.
This section expands the net investment income tax under IRC §1411 (currently a 3.8% surtax on certain unearned income of individuals, estates, and trusts, with revenues credited to the Federal Hospital Insurance Trust Fund to help finance Medicare Part A hospital benefits). Specifically, it (1) requires the tax under §1411(a)(1) to apply to the greater of net investment income or specified net income—a broader measure—for individuals with modified adjusted gross income exceeding the high-income threshold ($400,000 single/head of household/surviving spouse, $500,000 joint return, $250,000 married filing separately), phases in the base expansion based on the ratio of such excess MAGI to $100,000 ($50,000 married filing separately), and imposes an additional 13.6% rate on the lesser of that greater amount or MAGI exceeding the threshold; (2) increases the tax rate for trusts and estates to 17.4% (from 3.8%) applied to the greater of undistributed specified net income or undistributed net investment income; (3) excludes from net investment income items subject to Medicare self-employment tax under IRC §1401(b), Medicare employee payroll tax under §3101(b), or railroad retirement taxes under §3201(a), disregards net operating losses under §172, includes amounts under §§951, 951A (GILTI), 1293, or 1296, and excludes certain previously taxed foreign earnings and profits; and (4) allocates revenues by appropriating 71.3% of §1411 taxes to the Federal Old-Age and Survivors Insurance Trust Fund (in addition to 100% of OASDI payroll taxes), with parallel amendments to the Disability Insurance Trust Fund and Federal Hospital Insurance Trust Fund (modernizing appropriation language in 42 U.S.C. §§401, 1395i from "100 per centum of" to "100 percent of" for existing payroll taxes and adding the new §1411 allocation).