Sponsor
John Neely Kennedy
Senator · R-LA
Senator · R-LA
The bill protects employees and the self‑employed from unexpected increases in the 0.9% Medicare payroll/self‑employment surtax by indexing thresholds to inflation, trading modestly lower long‑term federal revenue and some administrative transition costs for greater tax predictability and reduced need for future fixes.
Middle‑income wage earners (employees) will avoid being pushed into paying the 0.9% additional Medicare payroll tax as the bill indexes the income thresholds to inflation, reducing unexpected payroll tax increases.
Self‑employed individuals and small business owners will face higher indexed thresholds for the 0.9% additional Medicare portion of self‑employment tax, preventing bracket creep as incomes rise with inflation.
Taxpayers and federal tax administrators benefit from automatic, formulaic indexing that reduces the need for frequent legislative fixes and simplifies future IRS administration of the payroll tax thresholds.
All taxpayers face modest long‑term federal revenue foregone because indexing the thresholds prevents some payroll tax increases, which could slightly widen budget deficits or reduce funding available for other programs.
Middle‑income families and taxpayers may be disadvantaged by the bill's rule to round adjusted thresholds up to the next $1,000, producing larger step increases that can disproportionately benefit higher earners compared with gradual COLA adjustments.
Taxpayers and small businesses will face administrative and transitional costs because the IRS must issue rules and update systems to implement the indexed thresholds for payroll withholding and self‑employment tax starting in 2027.
Based on analysis of 1 section of legislative text.
Indexes the dollar thresholds for the additional 0.9% Medicare and self‑employment taxes to annual COLA increases after 2026, rounded to the next $1,000.
Official title: Amend the Internal Revenue Code of 1986 to apply inflation adjustments to the additional hospital insurance tax on high income taxpayers.
Introduced July 22, 2026 by John Neely Kennedy · Last progress July 22, 2026
Automatically adjusts the dollar thresholds that trigger the additional 0.9% Medicare payroll tax on wages and the additional 0.9% self‑employment tax for high earners so those thresholds rise each year with an inflation (cost‑of‑living) formula beginning after 2026. Adjusted amounts are rounded up to the next $1,000 and apply by calendar year for wages and by taxable year for self‑employment income.