Restoring Solvency to Social Security and Medicare Trust Funds
The Social Security retirement and Medicare Hospital Insurance (HI) 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.
Restoring solvency requires slowing benefit growth, lowering healthcare costs, increasing revenue, or a combination of these. The trust funds are primarily financed by a 15.3 percent payroll tax on wages, split between worker and employer.
Proposed Solution: Employer Compensation Tax
A new alternative to boost revenue is replacing the employer side of the payroll tax with a flat Employer Compensation Tax (ECT) on all employer compensation costs.
Proposals to boost revenue often involve increasing the tax rate or the tax cap.
This approach is part of the Trust Fund Solutions Initiative.
Author's summary: Employer Compensation Tax proposed to restore trust fund solvency.
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