Final answer:
Payroll implications for regular tax-based health funding can lead to various changes, including increased payroll taxes or restructuring how retirement and healthcare are funded. Proposals to remove the payroll tax cap or to shift to fully funded systems would impact both employees' take-home pay and employers' tax liabilities. Ensuring the sustainability of social safety net programs may require significant reforms.
Step-by-step explanation:
The payroll implications for regular tax-based health funding can be significant, affecting both employees and employers. Payroll taxes encompass both deductions from an employee's wages and additional taxes employers must pay relative to those wages. If the government increases the percentage of the payroll tax or extends the amount of income to which payroll taxes apply, additional revenue can be generated. This would impact funds for social programs like Social Security and Medicare.
One proposal includes removing the income cap on payroll taxes, which would mean that individuals with high incomes would pay taxes on their entire earnings, as opposed to just the first $118,500 as was the case in 2015. This is seen by some as a way to address the regressive nature of payroll taxes and to improve the funding of social insurance programs. Others propose moving away from the pay-as-you-go system toward fully funded accounts that workers contribute to over their lifetimes and use in retirement, which would fundamentally change the structure of Social Security and Medicare.
Currently, the pay-as-you-go structure is unsustainable due to demographic shifts that have resulted in fewer workers paying in relative to the number of beneficiaries. To address these challenges, adjustments such as benefit reductions, changing the age for receiving benefits, or changing payroll taxes can be considered to ensure long-term sustainability of social safety net programs.