The You Earned It, You Keep It Bill

The You Earned It, You Keep It Bill

March 29, 2024

New Bill Would Raise Social Security Payroll Tax Cap and Eliminate Taxes on Benefits

 

A new bill introduced earlier this year in the House of Representatives would eliminate federal taxes on Social Security benefits for seniors beginning in 2025.  Many of you may not be aware of the fact that when Social Security was initially introduced back in the 1930’s that benefits were completely tax-free for everyone!  That changed in 1983 when President Regan signed a set of Amendments to Social Security, one of which made the benefits taxable.  Well, if this new bill gets passed it would reverse that 1983 law and reinstate the tax-free treatment of Social Security benefits on your Federal Tax return, which would result in a pretty substantial increase in net spendable income for most seniors.

The proposed legislation has an additional feature, designed to help Social Security remain solvent.  As you may know, unless something is changed, the Social Security Trust Fund is expected to deplete in ten years (2034).  This bill would raise the current income threshold for Social Security taxation.  Currently that threshold amount is $168,800.  For those Americans fortunate enough to make at least that much money annually, once they hit that number no additional Social Security tax is taken out of their paycheck.  This new bill would raise that income amount to $250,000 starting in 2025.  The result of this change would be effectively increasing dramatically the amount of money that would find its way into the Social Security Trust Fund.  In fact, if this legislation were to pass, it is projected that this simple change would extend the life of the Trust Fund by another twenty years! 

The bill, called the “You Earned It, You Keep It” Act was introduced by Congresswoman Angie Craig of Minnesota, who calls it “win-win legislation . . . it is a tax-cut for seniors and a way to ensure more Americans can depend on the Social Security benefits they’ve earned.”  And, one other prediction from the Social Security Administration’s chief actuary, Stephen Goss, is that this legislation would serve to reduce the federal debt by $8.9 trillion over the next 75 years!

Now, at this time this legislation is “pending” . . . but I, for one, remain hopeful that it will pass the House and the Senate and get signed by the President.  Social Security is too important to ignore and millions of Americans are counting on the promise of Social Security remaining solvent through their own retirement.  Dropping the taxation of benefits is simply a wonderful bonus!!

So, stay tuned.  It has been said that Congress eventually does the right thing, especially when they’ve exhausted all other options!!!  We can keep our fingers crossed that they will see the significant benefits to this proposed bill.  And, yes, I do have some very selfish reasons for wanting to see this legislation get passed . . . I turn 70 in April and will begin collecting my very own Social Security benefit!!