HR3271-119

What This Bill Does

The Medicare and Social Security Fair Share Act raises high-income tax contributions for Social Security and Medicare. For OASDI payroll taxes, it keeps the current payroll-tax cap structure but reopens taxable wages above $400,000, leaving the gap between the annual contribution and benefit base and $400,000 outside the OASDI wage base. It adds a further 1.2 percent Medicare tax on wages above $400,000 for single filers and $500,000 for joint filers, with special withholding rules that let employers disregard a spouse's wages and require employees to pay any uncollected amount. It applies similar rules to self-employment income. It also expands section 1411 net investment income tax for high-income individuals by using specified net income, adds a 13.6 percent additional bracket, raises the estate and trust rate from 3.8 percent to 17.4 percent, includes certain foreign corporation income, and directs 71.3 percent of section 1411 revenue to OASI, 10.3 percent to DI, and 28.7 percent to Medicare Hospital Insurance for tax years after 2025.

Who Benefits and How

Social Security trust funds benefit because new section 1411 revenue is allocated to OASI and DI and wages above $400,000 become subject to OASDI tax. Medicare Hospital Insurance benefits because the bill adds high-income Medicare taxes and allocates 28.7 percent of section 1411 revenue to the HI trust fund. Retirees and disabled beneficiaries benefit if added revenue improves program solvency for Social Security and Medicare. Federal budget writers benefit from a dedicated high-income revenue source tied to payroll, self-employment, and investment income.

Who Bears the Burden and How

High-income wage earners owe OASDI tax again above $400,000 and an extra 1.2 percent Medicare tax above the high-income thresholds. High-income self-employed taxpayers owe parallel additional self-employment taxes above $400,000 or $500,000 joint thresholds. High-income investors face expanded specified-net-income rules, a 13.6 percent additional bracket, and a higher 17.4 percent estate and trust rate. Employer payroll departments must adjust withholding and reporting for the reopened OASDI wage base and further additional Medicare tax.

Key Provisions

• Amends payroll tax rules so wages above $400,000 are again subject to Social Security tax.
• Adds 1.2 percent further additional Medicare taxes on high-income wages and self-employment income.
• Expands and raises net investment income taxation for high-income individuals, estates, and trusts.
• Allocates section 1411 revenue to OASI, DI, and Medicare Hospital Insurance trust funds after 2025.