S. 1690: Medicare and Social Security Fair Share Act

This bill, known as the Medicare and Social Security Fair Share Act, proposes changes to the Internal Revenue Code to increase funding for Social Security and Medicare programs in the United States. Below are the main provisions of the bill, summarized in layman's terms:

Wage Base for Social Security Taxes

The bill modifies the wage base for taxes that fund Social Security. Specifically, it sets a threshold where income above $400,000 is subject to additional taxation. For any calendar year in which the contribution and benefit base is less than $400,000, employees will only pay Social Security taxes on the first $400,000 of their earnings. This means higher income earners will contribute more towards Social Security taxes.

Additional Taxes on High-Income Earners

Furthermore, there will be an additional hospital insurance tax for very high-income taxpayers, specifically:

• 1.2% on wages exceeding $500,000 for joint returns and proportions for other filing statuses (such as $400,000 for single filers).
• This tax will apply to self-employment income as well.

Modification of Self-Employment Income Taxes

The bill also updates how self-employment income is taxed for contributions to Social Security and Medicare. It introduces similar thresholds as described for regular wage earners and adjusts tax rates accordingly for self-employed individuals earning above $400,000.

Investment Income Tax Changes

There are modifications to how net investment income is taxed. If an individual's income exceeds certain thresholds, a specified net investment income could be used for calculations instead of just net investment income, potentially leading to higher tax rates for high earners.

Revenue Transfers to Trust Funds

The bill specifies the percentages of certain collected taxes that will be allocated to the Federal Old-Age and Survivors Trust Fund, the Federal Disability Insurance Trust Fund, and the Federal Hospital Insurance Trust Fund. The allocations include:

• 71.3% of taxes from investment income to the Old-Age Trust Fund
• 10.3% of the same taxes to the Disability Insurance Trust Fund
• 28.7% to the Hospital Insurance Trust Fund

Effective Dates

The changes made by this bill are set to apply to earnings and taxable years beginning on or after January 1 of the first calendar year that starts after the bill is enacted. Specifically, the amendments regarding investment income and revenue transfers will apply starting after December 31, 2025.

Relevant Companies

• AAPL - Apple Inc.: This company might see an impact due to potential changes in consumer spending patterns from consumers facing higher taxes.
• AMZN - Amazon.com Inc.: Similar to Apple, increased taxation on high-income individuals may affect disposable income and spending habits, impacting sales.
• GOOGL - Alphabet Inc.: As a large corporation, potential changes in taxation and economic consumer behavior may influence future revenue.