09/12/2025
Congress Rethinks Taxable Social Security Benefits While Proposing a Tax Increase
Senator Ruben Gallego (D-AZ) has introduced the You Earned It, You Keep It Act, a bill that would permanently end federal income taxation of Social Security benefits while strengthening the program’s long-term solvency.
Currently, up to 85% of Social Security benefits are taxable. Gallego’s proposal would repeal this taxation entirely. To offset lost revenue and ensure Social Security and Medicare remain funded, the bill requires the Treasury to transfer amounts equal to the forgone taxes into the trust funds.
The legislation finances these transfers by increasing payroll taxes on wages above $250,000. At present, earnings above $176,100 are exempt from Social Security payroll taxes. This “donut hole” approach ensures that only higher earners contribute more, while middle- and working-class Americans remain unaffected.
Analyses suggest the measure would both deliver immediate tax relief for retirees and extend Social Security’s solvency into the 2050s. Advocacy groups such as the Senior Citizens League have endorsed the proposal, calling it a fair way to strengthen the program while helping seniors keep more of what they’ve earned.
