Summary of Provisions That Would Change the Social Security Program
Description of Proposed Provisions:
Provisions Affecting Coverage of Employment or Earnings, or Inclusion
of Other Sources of Revenue
Estimates based on the intermediate assumptions of
the 2024 Trustees Report
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|
Change from current law [percent of payroll] |
Shortfall eliminated | |||||
|---|---|---|---|---|---|---|
|
Long-range actuarial balance |
Annual balance in 75th year |
Long-range actuarial balance |
Annual balance in 75th year |
|||
| Current law shortfall in long-range actuarial balance is 3.50 percent of payroll and in annual balance for the 75th year is 4.64 percent of payroll. | ||||||
| F1 |
Starting in 2025, cover newly hired State and local government employees.
graph | table | pdf-graph | pdf-table | memo (Fiscal Commission 2010) | memo (Bipartisan Policy Center 2010) | memo (Warshawsky 2008) | memo (Social Security Advisory Board 2005) |
0.15 | -0.17 | 4% | -4% | |
| F2 |
Starting in 2025, exempt individuals with more than 180 quarters of coverage from
the OASDI payroll tax. Earnings exempted from OASDI payroll tax would not be used
in computing benefits.
graph | table | pdf-graph | pdf-table | memo (Warshawsky 2008) |
-0.81 | -1.02 | -23% | -22% | |
| F3 |
Expand covered earnings to include employer and employee premiums for employer-sponsored
group health insurance (ESI). Starting in 2028, phase out the OASDI payroll tax exclusion
for ESI premiums. Set an exclusion level at the 75th percentile of premium distribution
in 2028, with amounts above that subject to the payroll tax. Reduce the exclusion level
each year by 10 percent of the 2028 exclusion level until fully eliminated in 2038.
graph | table | pdf-graph | pdf-table | memo (Bipartisan Policy Center 2010) |
1.10 | 0.75 | 31% | 16% | |
| F4 |
Expand covered earnings to include contributions to voluntary salary reduction plans
(such as Cafeteria 125 plans and Flexible Spending Accounts). Starting in 2025, subject
these contributions to the OASDI payroll tax, making the payroll tax treatment of these
contributions like 401(k) contributions.
graph | table | pdf-graph | pdf-table | memo (Bipartisan Policy Center 2010) |
0.34 | 0.22 | 10% | 5% | |
| F6 |
Apply a separate 6.2 percent tax on investment income as defined in the Affordable
Care Act (ACA), with unindexed thresholds as in the ACA ($200,000 for single filer,
$250,000 for married filing jointly), starting in 2026. Proceeds go to the OASI and
DI Trust Funds.
graph | table | pdf-graph | pdf-table | memo (Sanders, DeFazio 2019) | memo (Sanders, DeFazio 2017) | memo (Sanders 2016) | memo (Sanders 2015) |
0.67 | 0.80 | 19% | 17% | |
| F7 |
For the estate tax, gift tax, and generation skipping transfer (GST) tax, return
the respective exemption thresholds and tax rates to 2009 levels ($3.5 million
threshold for estate tax with a top 45% tax rate) for deaths after 2024 and gifts
made after 2024, with those levels not indexed in future years. All proceeds from
the estate tax, gift tax, and GST tax would go to the OASI and DI Trust Funds.
graph | table | pdf-graph | pdf-table | memo (Van Hollen 2019) |
0.61 | 0.77 | 17% | 17% | |
| F8 |
For active S-corporation officers and limited partners, apply a 16.2 percent tax
on investment income as defined in the ACA, with unindexed thresholds as in the
ACA ($200,000 single filer, $250,000 for married filing joint), starting in 2025.
Proceeds go to the OASDI Trust Funds for tax attributable to 12.4 percent of the
total 16.2 percent tax rate.
graph | table | pdf-graph | pdf-table | memo (Sanders 2023) | memo (Sanders, DeFazio 2022) |
0.93 | 1.00 | 27% | 22% | |
| F9 |
Apply a separate 12.4 percent tax on investment income as defined in the Affordable
Care Act (ACA), with unindexed thresholds as in the ACA ($200,000 single filer, $250,000
for married filing joint), starting in 2026. Proceeds go to the OASDI Trust Funds.
graph | table | pdf-graph | pdf-table | memo (Sanders 2023) | memo (Sanders, DeFazio 2022) |
1.31 | 1.56 | 38% | 34% | |
| F10 |
Expand the tax on net investment income (NII) as defined in the Affordable Care Act
(ACA) to cover earnings from active S corporation holders and active limited partners.
Apply a 12.4-percent tax on this expanded definition of NII, payable to the OASI and
DI Trust Funds with specified thresholds, effective for 2025 and later. The unindexed
thresholds for this provision are $400,000 for a single filer and $500,000 for a married
couple filing jointly. The NII tax would apply to the lesser of NII and the excess of
modified adjusted income (MAGI) above the unindexed thresholds.
graph | table | pdf-graph | pdf-table | memo (Whitehouse, Boyle 2023) |
1.80 | 2.19 | 52% | 47% | |
| F11 |
Apply a separate 12.4-percent tax on net investment income (NII), as defined in the
Affordable Care Act (ACA), payable to the OASI and DI Trust Funds with an unindexed
threshold of $400,000, effective 2026 and later. The NII tax would apply to the lesser
of NII and the excess of modified adjusted income (MAGI) above the unindexed threshold
of $400,000. This single threshold would apply regardless of tax filing status.
graph | table | pdf-graph | pdf-table | memo (Larson 2023) |
1.21 | 1.53 | 34% | 33% | |