Social Security and Medicare Trust Funds
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.
Restoring Solvency
Restoring solvency requires slowing benefit growth, lowering health care costs, increasing revenue, or a combination of these.
Current Financing
The trust funds are financed by a 15.3 percent payroll tax on wages, split between worker and employer.
The 12.4 percent Social Security tax applies only to the first $176,100 of annual wages in 2025.
Alternative Solution
A new alternative is proposed: replacing the employer side of the payroll tax with a flat Employer Compensation Tax on all employer compensation costs.
Proposals to boost revenue often involve increasing the tax rate or the tax cap.
Author's summary: Employer Compensation Tax proposed to restore solvency.
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