HR2909-119

What This Bill Does

The You Earned It, You Keep It Act has a tax relief and financing tradeoff. It repeals inclusion of Social Security benefits in gross income, so beneficiaries would no longer pay federal income tax on those benefits. To finance Social Security, it changes OASDI wage and self-employment tax rules after 2025 so earnings above the greater of 250,000 dollars or the contribution and benefit base are again subject to Social Security taxes, while retaining the current base below the gap. It adds special rules for workers with multiple employers and railroad compensation so high earners cannot avoid the extra employee-side tax because wages are split across employers. It also includes excess earnings in the Social Security benefit formula at a 2 percent factor and adjusts related family maximum and average wage indexing rules, while deeming benefits not to exceed pre-enactment law for SSI, Medicaid, and CHIP eligibility calculations.

Who Benefits and How

Social Security beneficiaries benefit because their benefits would no longer be included in federal gross income. Retirees with taxable Social Security benefits benefit from lower federal income tax liability. Middle-income beneficiaries benefit if benefit-tax repeal increases after-tax retirement income without affecting SSI, Medicaid, or CHIP eligibility calculations. Social Security trust fund finances benefit from payroll tax collection on earnings above the higher of 250,000 dollars or the contribution and benefit base.

Who Bears the Burden and How

High-income employees pay Social Security payroll tax again on wages above the higher of 250,000 dollars or the contribution and benefit base. High-income self-employed workers pay OASDI self-employment tax on excess self-employment income after 2025. Employers and payroll providers must administer the new high-earner wage rules, successor-employer rules, and multiple-employer tax coordination. The Internal Revenue Service and Social Security Administration must coordinate tax collection, benefit formulas, excess earnings, and eligibility deeming rules.

Key Provisions

• Repeals federal income taxation of Social Security benefits.
• Applies OASDI payroll tax to wages above the higher of 250,000 dollars or the contribution and benefit base after 2025.
• Applies parallel self-employment income rules to excess compensation above the threshold.
• Creates section 3103 multiple-employer rules for high earners and coordinates railroad retirement tax treatment.
• Adds 2 percent of excess average indexed monthly earnings to the benefit formula while protecting SSI, Medicaid, and CHIP eligibility calculations.