Medicare and Social Security Fair Share Act

Summary

Imposes several new and higher taxes on high earners and unearned income. It expands the amount of wages subject to Social Security payroll taxes up to a $400,000 ceiling, creates an additional 1.2% Medicare (hospital insurance) tax on high wages and high self-employment income, changes withholding and collection rules for employers, and substantially increases and broadens the net investment income tax (NIIT) on very high MAGI earners and for trusts/estates.

• Expands the Social Security taxable wage base so wages above the statutory base up to $400,000 can be taxed for FICA when the statutory base is under $400,000.
• Creates a new 1.2% additional Medicare (HI) payroll tax on high wages above specified thresholds for joint, separate, and other filers.
• Imposes a 1.2% additional Medicare tax on very high self-employment income and adjusts self-employment tax calculations where the Social Security base is below $400,000.
• Greatly increases and broadens the net investment income tax (NIIT) base and rate—raising the effective tax burden on unearned income for very high MAGI taxpayers and for trusts/estates.
• Changes employer withholding and successor-employer rules; employees remain liable for underwithheld tax while employer penalty exposure is preserved.
• Amendments generally take effect for remuneration and taxable years beginning January 1 of the first calendar year after enactment.
• Disallows deduction of the added self-employment HI tax and tightens cross-references and coordination rules across payroll and self-employment tax provisions.
• Trusts and estates face modified NIIT treatment that can increase tax on undistributed investment income.