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.
Current Financing
The trust funds are financed primarily by a 15.3 percent payroll tax on wages, split between worker and employer.
- 12.4 percent Social Security tax applied to the first $176,100 of annual wages in 2025.
Proposed Solution
A new alternative: replacing the employer side of the payroll tax with a flat Employer Compensation Tax (ECT) on all employer compensation costs.
Restoring solvency to these trust funds will require slowing benefit growth, lowering health care costs, increasing revenue, or some combination.
Author's summary: Employer Compensation Tax proposed to restore solvency.