S 1690
Medicare and Social Security Fair Share Act
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Bill overview
The Medicare and Social Security Fair Share Act aims to increase funding for Social Security and Medicare by modifying payroll tax rules and adjusting tax rates on high-income earners. Specifically, it increases the wage base subject to Social Security taxes, implements a new 1.2% tax on wages exceeding $500,000 for joint returns and $400,000 for single filers, and adjusts tax rates on self-employment income and unearned income. The bill also includes provisions to address the treatment of foreign income and revenue transfers to trust funds.
Key provisions
- Increases the wage base for Social Security taxes to $400,000.
- Imposes a 1.2% tax on wages exceeding $500,000 (joint) or $400,000 (single) for high-income taxpayers.
- Modifies the tax on net earnings from self-employment for taxpayers with income exceeding $400,000.
- Adjusts the tax on unearned income, including net investment income, for taxpayers with modified adjusted gross income exceeding $400,000.
- Addresses the treatment of foreign income and earnings in calculating net investment income.
- Reallocates a portion of Social Security taxes to the Old-Age and Survivors, Disability Insurance, and Federal Hospital Insurance Trust Funds.
- Establishes special rules for the collection of the additional tax on wages exceeding $400,000.
- Clarifies the definition of specified net income for the unearned income tax.
Who is affected
- High-income taxpayers
- Self-employed individuals
- Individuals with unearned income (e.g., investment income)
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119th CONGRESS — 1st Session
S. 1690
IN THE SENATE OF THE UNITED STATES
A BILL
To amend the Internal Revenue Code of 1986 to increase funding for Social Security and Medicare.
This Act may be cited as the Medicare and Social Security Fair Share Act
.
Paragraph (1) of section 3121(a) of the Internal Revenue Code of 1986 is amended to read as follows:
in the case of taxes imposed by sections 3101(a) and 3111(a), for any calendar year in which the contribution and benefit base (as determined under section 230 of the Social Security Act) is less than $400,000, so much of the remuneration (other than remuneration referred to in the succeeding paragraphs of this subsection) with respect to employment that has been paid to an individual by an employer during the calendar year as exceeds such contribution and benefit base but does not exceed $400,000;
For purposes of subsection (a)(1), if an employer (hereinafter referred to as successor employer) during any calendar year acquires substantially all the property used in a trade or business of another employer (hereinafter referred to as a predecessor), or used in a separate unit of a trade or business of a predecessor, and immediately after the acquisition employs in his trade or business an individual who immediately prior to the acquisition was employed in the trade or business of such predecessor, then, for the purpose of determining the amount of remuneration paid by the successor employer under such subsection, any remuneration (other than remuneration referred to in the paragraphs succeeding paragraph (1) of subsection (a)) with respect to employment paid (or considered under this subsection as having been paid) to such individual by such predecessor during such calendar year and prior to such acquisition shall be considered as having been paid by such successor employer.
Clause (i) of section 3231(e)(2)(A) of such Code is amended to read as follows:
For any calendar year in which the applicable base is less than $400,000, the term compensation does not include so much of the remuneration paid during any calendar year to an individual by an employer for services rendered as an employee to such employer as exceeds the applicable base but does not exceed $400,000.
In addition to the tax imposed by paragraphs (1) and (2) and the preceding subsection, there is hereby imposed on every taxpayer (other than a corporation, estate, or trust) a tax equal to 1.2 percent of wages which are received with respect to employment (as defined in section 3121(b)) during the taxable year which are in excess of—
in the case of a joint return, $500,000,
in the case of a married taxpayer (as defined in section 7703) filing a separate return, ½ of the dollar amount determined under subparagraph (A), and
in any other case, $400,000.
Section 3102 of such Code is amended by adding at the end the following new subsection:
In the case of any tax imposed by section 3101(b)(3), subsection (a) shall only apply to the extent to which the taxpayer receives wages from the employer in excess of $400,000, and the employer may disregard the amount of wages received by such taxpayer’s spouse.
To the extent that the amount of any tax imposed by section 3101(b)(3) is not collected by the employer, such tax shall be paid by the employee.
If an employer, in violation of this chapter, fails to deduct and withhold the tax imposed by section 3101(b)(3) and thereafter the tax is paid by the employee, the tax so required to be deducted and withheld shall not be collected from the employer, but this paragraph shall in no case relieve the employer from liability for any penalties or additions to tax otherwise applicable in respect of such failure to deduct and withhold.
The amendments made by this section shall apply to remuneration paid, and taxable years beginning, on or after January 1 of the first calendar year that begins after the date of enactment of this Act.
Paragraph (1) of section 1402(b) of the Internal Revenue Code of 1986 is amended to read as follows:
in the case of the tax imposed by section 1401(a) for any taxable year beginning in a calendar year in which the contribution and benefit base (as determined under section 230 of the Social Security Act) is less than $400,000, the excess (if any) of—
so much of the net earnings from self-employment which is in excess of—
an amount equal to the contribution and benefit base (as determined under section 230 of the Social Security Act) which is effective for the calendar year in which such taxable year begins, reduced (but not below zero) by
the amount of the wages paid to such individual during such taxable year, over
the sum of—
the excess (if any) of—
the net earnings from self-employment reduced by the excess (if any) of subparagraph (A)(i) over subparagraph (A)(ii), over
$400,000, reduced by such contribution and benefit base, plus
the amount of the wages paid to such individual during such taxable year in excess of such contribution and benefit base and not in excess of $400,000; or
in the case of a joint return, $500,000,
in the case of a married taxpayer (as defined in section 7703) filing a separate return, ½ of the dollar amount determined under subparagraph (A), and
in any other case, $400,000.
The amounts under clause (i), (ii), or (iii) (whichever is applicable) of subparagraph (A) shall be reduced (but not below zero) by the amount of wages taken into account in determining the tax imposed under section 3101(b)(3) with respect to the taxpayer.
Section 164(f) of such Code is amended by striking section 1401(b)(2)
and inserting paragraphs (2) and (3) of section 1401(b)
.
Section 1402(a)(12)(B) of such Code is amended by striking the rate imposed under paragraph (2) of section 1401(b)
and inserting the rates imposed under paragraphs (2) and (3) of section 1401(b)
.
Section 1401(b)(2)(B) of such Code is amended by striking section 3121(b)(2)
and inserting section 3101(b)(2)
.
The amendments made by this section shall apply to net earnings from self-employment derived, and taxable years beginning, on or after January 1 of the first calendar year that begins after the date of enactment of this Act.
the greater of specified net income or net investment incomefor
net investment incomein subparagraph (A) thereof.
The increase in the tax imposed under subsection (a)(1) by reason of the application of subparagraph (A) (determined before application of paragraph (2)) shall not exceed the amount which bears the same ratio to the amount of such increase (determined without regard to this paragraph) as—
the excess described in subparagraph (A), bears to
For purposes of this subsection, the term high income threshold amount
means—
in the case of a taxpayer making a joint return under section 6013 or a surviving spouse (as defined in section 2(a)), $500,000, and
For purposes of this section, the term specified net income means net investment income determined—
without regard to the phrase other than such income which is derived in the ordinary course of a trade or business not described in paragraph (2),
in subsection (c)(1)(A)(i),
without regard to the phrase described in paragraph (2)
in subsection (c)(1)(A)(ii),
other than property held in a trade or business not described in paragraph (2)in subsection (c)(1)(A)(iii),
without regard to paragraphs (2), (3), and (4) of subsection (c), and
by treating paragraphs (5) and (6) of section 469(c) (determined without regard to the phrase To the extent provided in regulations,
in such paragraph (6)) as applying for purposes of subsection (c) of this section.
Section 1411(a)(2) of the Internal Revenue Code of 1986 is amended—
3.8 percentand inserting
17.4 percent, and
undistributed net investment incomeand inserting
the greater of undistributed specified net income or undistributed net investment income.
wages received with respect to employment on which a tax is imposed under section 3101(b) (determined without regard to section 3101(c)) or 3201(a) (including amounts taken into account under section 3121(v)(2)), and
wages received from the performance of services earned outside the United States for a foreign employer.
Section 1411(c)(1)(B) of such Code is amended by inserting (other than section 172)
after this subtitle
.
Section 1411(c)(1)(A) of such Code is amended by striking and
at the end of clause (ii), by striking over
at the end of clause (iii) and inserting and
, and by adding at the end the following new clause:
Section 1411(c) of such Code is amended by adding at the end the following new paragraph:
100 per centum of,
100 percent ofbefore
the taxeseach place it appears in paragraphs (1), (2), (3), and (4), and
andat the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting
; and, and by inserting after paragraph (4) the following new paragraph:
The fourth sentence of section 201(a) of such Act (42 U.S.C. 401(a)) is amended by striking clauses (3) and (4)
each place it appears and inserting paragraphs (3), (4), and (5)
.
100 per centum of, and
andat the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting
; and, and by inserting after paragraph (2) the following new paragraph:
10.3 percent of the taxes imposed by section 1411 of the Internal Revenue Code of 1986 for any taxable year beginning after December 31, 2025, as determined by the Secretary of the Treasury or the Secretary's delegate based on tax returns under subtitle F of such Code.
Section 1817(a) of the Social Security Act (42 U.S.C. 1395i(a)) is amended—
100 per centum of,
100 percent ofbefore
the taxeseach place it appears in paragraphs (1) and (2), and
andat the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting
; and, and by inserting after paragraph (2) the following new paragraph:
28.7 percent of the taxes imposed by section 1411 of the Internal Revenue Code of 1986 for any taxable year beginning after December 31, 2025, as determined by the Secretary of the Treasury or the Secretary's delegate based on tax returns under subtitle F of such Code.
The amendments made by this section shall apply to taxable years beginning after December 31, 2025.