In the U.S., there are millions of Americans who rely on Social Security as their financial backbone. Many depend on it for covering their essential expenses. With that being said, a new bill is being introduced, referred to as the You Earn It, You Keep It Act. This aim of this bill is simple, to end taxes on Social Security benefits while simultaneously working on the programs trust fund crisis.
What the Bill Would Do
The act would ensure that retirees no longer have to pay federal income taxes on Social Security benefits. This would be beneficial to millions of Americans as it would mean more money in the pockets.
However, it’s important to remember that this bill does not make everything rosy. In order to compensate for the tax revenue that will be lost, the bill suggests lifting the cap on income subject to Social Security payroll taxes.
Wages over $176,100 are exempt from Social Security taxes. In order to ensure that wealthy Americans contribute more, this plan would reintroduce taxes on income over $250,000.
Tackling the Insolvency Crisis
The main concern about Social Security is that the programs trust fund is expected to run out by 2034 if no changes are made. This will result in approximately 20% benefits for Social Security recipients. This will majorly impact families especially those who live on fixed incomes and rely on Social Security.
Those who support this bill say that it will extend the lifespan of the trust fund up until 2058. By lifting the payroll tax cap for high earners, the plan raises new revenue without cutting benefits for ordinary retirees.
What Americans Think
Although it may seem like a controversial decision, according to poll by the Cato Institute, 37% of Americans favour tax increases to guarantee pensioners continue to get full benefits, and 35% support borrowing money to address bankruptcy risks.
The Political Fireworks
The politics are just as bitter. The One Big Beautiful Bill Act’s senior deduction, according to President Donald Trump, essentially eliminated taxes on Social Security benefits. But not every beneficiary receives those advantages equally.
“Trump claimed he ended taxes on Social Security,” Gallego said, referring to the senior deduction in the One Big Beautiful Bill Act. “My bill actually does it. Permanently.”
What It Means for Retirees
- Immediate Relief for Retirees
- Retirees would no longer pay federal income taxes on Social Security benefits.
- This would then allow for beneficiaries to have a little extra money in their pockets every month.
- There are many households living on fixed incomes and this could help majorly with essential expenses such groceries, rent and utilities.
- Improving the programs Trust Fund
- The adjustment is projected to extend the Social Security trust fund’s solvency to 2058.
- What supporters think?
- The program would potentially become more stable and workers would benefit from this.
- The plan protects full benefits for future retirees.
- What opponents think?
- By moving the tax burden to higher income earners, it may be seen as unfair.
- All those wealthier Americans already pay a significant amount in taxes and may resist the new approach.
The Bottom Line
The new bill aims to mitigate taxes on Social Security and potentially extend the programs trust fund by about two decades more. Regardless of how it’s viewed, there are many concerns about the sustainability of Social Security for future generations.
It is important for beneficiaries to plan ahead and if possible, look into other savings apart from Social Security. This will ensure that your finances are in order when it comes to your retirement. Beneficiaries must be sure to keep updated with verified information so that they are aware of what’s happening with their benefits.