One of former President Donald Trump’s long-standing tax policy goals — eliminating taxes on Social Security benefits — is gaining traction with some Democratic lawmakers, but with a key condition attached.
Trump has been urging Congress to include the elimination of federal taxes on Social Security benefits in the upcoming budget bill.
According to a recent analysis reported by The Center Square, this move would reduce federal revenue by $1.5 trillion over the next decade and accelerate the depletion of the Social Security trust fund by two years.
However, a new proposal from Rep. Angie Craig (D-Minn..) offers a different approach. Her bill, titled the You Earned It, You Keep It Act, aims to eliminate taxes on Social Security benefits while simultaneously securing the program’s long-term financial stability.
The plan would offset lost federal revenue by lifting the cap on payroll taxes for high earners — requiring individuals earning $250,000 or more per year to continue contributing to Social Security. Currently, only income up to $168,600 is subject to the Social Security payroll tax.
An analysis by the Social Security Administration indicates that this change could extend the trust fund’s solvency to the year 2058 — a significant improvement from the current projected insolvency date of 2033.
The bill has gained support from several House Democrats, including Reps. Ro Khanna (D-Calif.), Brittany Pettersen (D-Colo.), Sean Casten (D-Ill.), and Josh Riley (D-N.Y.) have signed on as co-sponsors.
“Our seniors spend their whole lives working hard and paying into Social Security – they shouldn’t pay needless taxes when it’s finally time to collect the benefits they’ve earned,” Rep. Pettersen said.
“This bill also strengthens Social Security for the long term, so hardworking people now – and generations down the line – can keep more of what they’ve earned and retire with dignity.”
Under current law, Social Security beneficiaries with combined income under $25,000 (or $32,000 for married couples filing jointly) are not taxed on their benefits. Those with higher incomes, however, can be taxed on up to 85% of their Social Security income.
The You Earned It, You Keep It Act, introduced on Tuesday, has already been endorsed by advocacy groups including The Senior Citizens League and Social Security Works.
“Social Security Works is delighted to endorse the You Earned It, You Keep It Act,” said Nancy Altman, President of Social Security Works.
“This bill strengthens Social Security by requiring the wealthiest to contribute at the same rate as everyone else, while giving a much-needed tax break to millions of seniors.”