NEW YORK — Lawmakers in the House of Representatives voted Wednesday to add Social Security taxes on the income of people who manage hedge funds and other investment vehicles.
The measure was sponsored by Rep. Kevin Brady, D-Texas, and Rep. Steve Cohen, D, Tennessee.
The bill was sent to the Senate by unanimous consent, where it could pass or die.
The bill also would allow tax-exempt funds, like pension funds, to deduct their Social Security contributions from their tax returns.
Social Security has long been considered the bedrock of retirement security for millions of Americans.
In some cases, it pays for benefits and pensions for people who died before they reached the age of 60.
But a 2016 study by the nonpartisan Tax Policy Center found that the vast majority of Social Security payments are not taxed at all.
They come from a mix of government revenue sources and private investments.
Some $1.5 trillion in Social Security payroll tax revenue is deferred to retirement, meaning Social Security is not taxed.
About $300 billion of that is due to tax-free contributions made by people who were not eligible for the Social Security program at the time they made the contributions.
Many hedge fund executives, such as Charles Schwab and BlackRock, have not made Social Security investments in the past and are not eligible to receive benefits.
That has led to criticism from some lawmakers.
Last month, House Republicans proposed cutting $50 billion in Social Service tax benefits to help fund a new tax reform plan that would reduce the corporate tax rate to 15 percent.
“The bill is very important because it is the only way to address the $700 billion shortfall in Social Services,” Brady said in a statement Wednesday.
“If we can get a bill passed that doesn’t include any cuts to Social Security, that will send a message to the hedge fund and private equity crowd that we will not support them and that we have other priorities.”
The Tax Policy Institute, which has been working to reform Social Security for decades, says that about $1 trillion in tax breaks would be offset by reducing taxes for people with high incomes.
About half of the savings would come from the top 1 percent of taxpayers, with a net effect of about $500 billion.
For now, the bill is subject to a filibuster and is not expected to pass the Senate.
But if it does pass, it could be signed into law by President Donald Trump.
