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Repeals federal income taxation of Social Security benefits for taxable years beginning after enactment and replaces the lost transfers to Social Security and Railroad Retirement trust funds with annual Treasury appropriations equal to the reduction in transfers caused by the repeal. The measure removes Section 86’s application to Social Security benefits and directs the Treasury to make up, each fiscal year, amounts equal to the reduction in transfers to the specified trust funds resulting from that tax change.
The bill reduces taxes and reporting complexity for Social Security recipients but increases federal outlays and long‑term budget risk while partially eroding tax progressivity among retirees.
Seniors and retirees (including many Medicare beneficiaries) would keep more of their Social Security income because Social Security benefits would be excluded from adjusted gross income, reducing federal income tax liability (effectively a tax cut for Social Security recipients).
Medicare beneficiaries and other Social Security recipients would face less complexity in taxable income reporting because Social Security benefits would no longer be included in AGI calculations.
Taxpayers and the federal budget would bear higher annual outlays because the Treasury must appropriate funds each year to Social Security and Railroad Retirement trusts equal to transfers lost by excluding benefits from AGI.
Taxpayers and middle-class families face increased long‑term fiscal risk because the change shifts financing pressure onto general revenues, which could accelerate budget strain and crowd out other programs if appropriations are constrained.
Higher-income retirees (and higher-earning Social Security recipients) would disproportionately benefit because exempting benefits from AGI reduces the progressivity of the tax code relative to prior rules that phased in taxation for higher earners.
Introduced January 31, 2025 by Jefferson Van Drew · Last progress January 31, 2025