New Bill Aims to ‘Actually’ End Taxes on Social Security

Sen. Ruben Gallego, D-Ariz., has put forth a groundbreaking proposal to address the issue of double taxing older adults and to increase taxes on millionaires. The bill, known as the You Earn It, You Keep It Act, aims to permanently eliminate federal taxes on Social Security benefits while raising payroll tax caps for high earners to sustain the program’s financial stability.

Gallego introduced this legislation last week, with Rep. Angie Craig, D-Minn., sponsoring a House version of the bill back in April. The senator argues that the current system of taxing Social Security benefits is unjust to retirees who heavily rely on these benefits as a significant or sole source of income.

Under the proposed You Earn It, You Keep It Act, federal taxes on Social Security benefits would be eliminated, and the Social Security payroll tax cap would be increased to cover annual earnings exceeding $250,000. Currently, only the first $176,100 of wages is subject to Social Security payroll taxes.

This initiative comes in response to President Donald Trump’s campaign promise to eliminate taxes on Social Security, which was not fully realized in his One Big, Beautiful Bill Act. While the act included a deduction to reduce taxes on benefits, it was temporary and did not completely eliminate taxes on Social Security benefits.

Gallego emphasizes the permanency of his bill in contrast to Trump’s temporary deduction, stating that his proposal actually ends taxes on Social Security benefits permanently. Retirement advocates, including The Senior Citizens League, have shown strong support for Gallego’s plan, lauding it as a sensible step to ensure older Americans can retain more of their hard-earned income.

However, critics of the bill raise concerns about the financial repercussions of eliminating benefit taxes, citing potential negative impacts on the solvency of the Social Security program. The Center on Budget and Policy Priorities warns that removing all taxes on Social Security benefits could exacerbate the program’s funding shortfall, with trust funds projected to be depleted in the near future.

Gallego contends that the lifted payroll tax cap under the You Earn It, You Keep It Act would sustain the Social Security Administration’s funding until 2058. The proposal also sheds light on the existing exemptions for low-income retirees who are already exempt from federal taxes on Social Security benefits based on their combined income.

In conclusion, the debate surrounding the fairness and financial sustainability of Social Security continues to evolve, with Gallego’s bill offering a long-term solution to benefit taxation and redistributing funding responsibilities. As Social Security faces projected shortfalls in the coming years, the outcome of this debate will have lasting repercussions for retirees and the program’s future.