Sponsors
The bill protects retirees from inflation-driven loss of tax thresholds and funds trust shortfalls while offsetting costs through annual rescissions of non-security discretionary appropriations — which raises taxes for many beneficiaries, risks cuts to public programs, and creates recurring fiscal uncertainty.
Seniors and Railroad Retirement beneficiaries: the bill indexes the base amounts for taxation to inflation, protecting thresholds from erosion and preserving some tax relief over time.
Social Security and Railroad Retirement Trust Funds: the bill directs appropriations to make the trust funds whole for revenue reductions caused by the tax changes, maintaining benefit funding levels.
Taxpayers: the bill reduces net federal spending impact by rescinding appropriations to offset the cost of the retiree tax changes, limiting the net budgetary cost to taxpayers.
Many Social Security and Railroad Retirement beneficiaries (including middle-income retirees): up to 85% of benefits may become taxable under the change, increasing federal income tax bills for a large number of retirees.
Non-security discretionary programs and state-administered services: pro rata rescissions used to offset the tax changes could reduce funding for education, health, infrastructure, and other programs, harming beneficiaries and state budgets.
Retirees with higher taxes: higher tax payments will reduce disposable income for some seniors and may increase reliance on other benefits or force greater drawdowns of savings.
Based on analysis of 3 sections of legislative text.
Increases the taxable share of Social Security benefits, raises and indexes income thresholds, and offsets costs through annual appropriations rescissions beginning FY2027.
Introduced March 21, 2025 by Nicole Malliotakis · Last progress March 21, 2025
Raises the share of Social Security benefits that can be taxed and increases the income thresholds at which benefits become taxable, with those thresholds indexed for inflation. The law requires the Treasury to replace reductions in trust-fund transfers caused by the tax change and then forces an annual pro rata rescission from regular appropriations (starting FY2027) equal to the Treasury’s calculated cost of the retiree tax relief. The tax changes apply to tax years beginning after Dec. 31, 2025; the rescission mechanism takes effect for fiscal year 2027 and each fiscal year thereafter and must be reported annually by OMB.