From Money Magazine:

Lawmakers aim to eliminate taxes on Social Security benefits with the You Earned It, You Keep It Act. 40% of beneficiaries currently pay taxes on benefit income. The bill would raise the wage cutoff for Social Security taxes and benefit recipients making up to $25,000 would no longer be taxed.

Current restrictions on Social Security benefits tax: Single filers earning between 25,000-34,000 may pay 50%, and over $34,000 may pay 85%. At present, federal taxes are levied in nearly a dozen states, and the bill will not affect state social security taxes.

The bill proposed by Rep. Angie Craig will bring in more tax revenue by raising the cutoff point when Americans are no longer subject to payroll taxes. Currently, the 6.2% Social Security tax applies to a maximum of $168,600 of wages. The bill would add Social Security taxes on earnings above $250,000.

If enacted, the You Earned It, You Keep It Act will keep Social Security solvent for 20 years, which would buy time for the program. Surpluses projected to run dry by 2034, at which point retirees’ benefits would be cut by 20%. Goss estimated the projected date of depletion would move back to 2054 if the bill were enacted.

The bill is not the first proposed solution to address Social Security funding problems, but it is a popular idea and could save Social Security. Although the bill may not get bipartisan support in its current form, Republicans have also looked at the idea of eliminating taxes on Social Security benefits in other recent legislative proposals.



Read more: Bill Aims to Eliminate Taxes on Social Security Benefits