Sponsors (6)
The bill raises taxes on high‑income individuals and tightens anti‑avoidance rules to generate dedicated revenues that strengthen Social Security and Medicare solvency, at the cost of higher tax bills for affected earners, increased compliance burden, and reduced budget flexibility.
Workers with earnings above the old Social Security cap and up to $400,000 will have those wages newly covered by OASDI, increasing future Social Security contributions and (eventually) benefits for those workers.
Very-high-wage earners will pay an additional 1.2 percentage-point Medicare (HI) payroll tax on high wages, producing new revenue that helps shore up Medicare hospital insurance.
Additional revenues from the surtaxes and expanded NIIT are directed to replenish Social Security and Medicare trust funds, supporting benefits for current and future beneficiaries.
High‑income employees and self‑employed individuals will pay materially higher payroll and Medicare taxes (including the new 1.2% HI surtax and expanded OASDI coverage), reducing take‑home pay and raising tax bills for those households.
Owners of investment income face a much higher effective tax on investment returns (the NIIT can rise sharply, in some cases up to ~17.4%), significantly increasing tax bills for high‑income investors.
The law increases compliance and administrative complexity for taxpayers, estates/trusts, employers, and the IRS (new definitions, phased rules, coordinated computations, regulatory guidance), raising time and professional costs.
Based on analysis of 4 sections of legislative text.
Raises taxes on very high wages, self‑employment income, and investment income by extending Social Security payroll coverage to $400,000, adding a 1.2% HI payroll/self‑employment tax above set thresholds, and creating a large NIIT surtax for the very wealthy.
Official title: Amend the Internal Revenue Code of 1986 to increase funding for Social Security and Medicare.
Introduced May 8, 2025 by Sheldon Whitehouse · Last progress May 8, 2025
Creates new higher-income payroll and investment surtaxes and extends Social Security payroll-tax coverage to more wages. The bill adds an upper wage base for Social Security up to $400,000, imposes an extra 1.2 percentage‑point Medicare (HI) payroll tax on high wages and self‑employment income above specified thresholds, and creates an additional surtax on net investment income for very high‑income taxpayers. The changes apply to wages, self‑employment income, and net investment income for taxable years and remuneration paid beginning January 1 of the first calendar year after enactment and include employer withholding rules, successor‑employer treatment, and coordination with existing self‑employment and deduction rules.