Employer Compensation Tax for Social Security and Medicare
The Social Security retirement and Medicare Hospital Insurance trust funds are approaching insolvency, with depletion expected in seven years.
Without action, retirees face a 24 percent benefit cut in 2032, and Medicare hospital payments would be cut by 12 percent.
- Slowing benefit growth
- Lowering health care costs
- Increasing revenue
The Social Security and Medicare trust funds are financed by a 15.3 percent payroll tax on wages, split between worker and employer.
Restoring solvency to these trust funds will require slowing benefit growth, lowering health care costs, increasing revenue, or some combination.
A new alternative is proposed: replacing the employer side of the payroll tax with a flat Employer Compensation Tax on all employer compensation costs.
Author summary: New tax to restore solvency.
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