To amend the Internal Revenue Code of 1986 to repeal the inclusion in gross income of social security benefits, and for other purposes.
Analysis under review: This bill has generated analysis that may be too generic or incomplete. Clause-level evidence remains available below.
Summary
What This Bill Does
The You Earned It, You Keep It Act eliminates federal income tax on Social Security benefits for all taxable years after enactment by repealing Section 86 of the Internal Revenue Code. To offset the revenue loss and strengthen Social Security solvency, it applies Social Security payroll taxes (OASDI) to earnings above $250,000 (creating a "donut hole" between the current contribution base and $250,000), adjusts self-employment income rules accordingly, adds a new 2% benefit formula for excess average indexed monthly earnings above $250,000, and gradually increases the national average wage index by 0.7% to 0.9% over time. It also appropriates funds to replace revenues lost from repealing the tax on benefits.
Who Benefits and How
- Social Security recipients no longer pay federal income tax on their benefits, providing a direct income boost especially to middle-income retirees.
- High earners paying into the expanded payroll tax earn additional (modest) Social Security benefits through the new 2% benefit formula on excess earnings.
- The Social Security Trust Funds receive new revenue from high-earner payroll taxes and direct Treasury appropriations.
Who Bears the Burden and How
- High-income workers earning above $250,000 face new payroll taxes on earnings above that threshold.
- Employers of high-income workers pay matching FICA taxes on earnings above $250,000.
- The federal treasury must appropriate funds to replace lost revenue from repealing the benefit tax.
Key Provisions
- Repeals Section 86 of the IRC (taxation of Social Security benefits) (Section 2)
- Applies Social Security payroll taxes to earnings above $250,000 with a donut hole (Section 3)
- Creates new Section 3103 IRC for multi-employer wage reconciliation (Section 3)
- Adds 2% benefit formula tier for excess average indexed monthly earnings (Section 4)
- Increases national average wage index by 0.7-0.9% for calendar years after 2025 (Section 3)
- Holds harmless SSI, Medicaid, and CHIP eligibility from increased SS benefits (Section 4)
Evidence Chain:
This summary is generated from the full bill text using AI analysis. Expand "Detailed Analysis" below for identified beneficiaries/burden bearers.
At a Glance
What This Bill Does
Repeals the federal income tax on Social Security benefits while expanding Social Security funding by applying payroll taxes to earnings above $250,000 and creating a new benefit formula for high earners.
Key Policy Areas
Taxation, Social Security, Retirement Security
Primary Purpose
Repeals the federal income tax on Social Security benefits while expanding Social Security funding by applying payroll taxes to earnings above $250,000 and creating a new benefit formula for high earners.
Policy Domains
New Benefit Formula for High-Earner Contributions
Identified Gains
Contextual inference, no direct clause citation- High-income workers contributing above $250,000
- Social Security system long-term solvency
Contextual inference, no direct clause citation
Identified Costs
Contextual inference, no direct clause citation- Social Security Trust Funds (additional benefit obligations)
Contextual inference, no direct clause citation
Expanded Payroll Tax on High Earners Above $250,000
Identified Gains
Contextual inference, no direct clause citation- Social Security Trust Funds
- Current and future Social Security beneficiaries
Contextual inference, no direct clause citation
Identified Costs
Contextual inference, no direct clause citation- Workers earning above $250,000
- Employers of high-income workers
- Self-employed individuals earning above $250,000
Contextual inference, no direct clause citation
Repeal of Income Tax on Social Security Benefits
Identified Gains
Contextual inference, no direct clause citation- Social Security recipients who currently pay income tax on benefits
- Middle-income retirees
Contextual inference, no direct clause citation
Identified Costs
Contextual inference, no direct clause citation- Federal treasury (general fund)
Contextual inference, no direct clause citation
Sponsors
Legislative Progress
IntroducedMr. Gallego introduced the following bill; which was read twice …
Stakeholder Effects
cui bono?How this legislation distributes effects. Mention counts reflect frequency, not effect magnitude.
Federal general fund (Treasury), Social Security Trust Funds
Social Security Trust Funds faces effects in multiple directions
Future Social Security beneficiaries, Middle-income retirees, Social Security recipients who pay income tax on benefits
High-income workers contributing above $250,000, High-income workers with multiple employers, Workers earning above $250,000
Positive-direction: High-income workers contributing above $250,000
Negative-direction: High-income workers with multiple employers, Workers earning above $250,000
Self-employed individuals earning above $250,000
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
- "Congress"
- → Legislator
- "Treasury"
- → Revenue collector affected by repeal
- "IRS"
- → Tax administrator
- "SSA"
- → Benefit calculator
- "Employers"
- → Matching tax payers
- "High-income workers"
- → New taxpayers above threshold
- "High earners"
- → Benefit recipients on excess earnings
- "Social Security Administration"
- → Benefit calculator
Key Definitions
Terms defined in this bill
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology