Sponsors (15)
The bill lowers taxes for many low- and middle-income households and protects the exemption from inflation while funding that change partly by taxing high earners more—but it reduces net revenue, adds administrative complexity, can create income cliffs, and may unintentionally hurt some retirees.
Low- and middle-income taxpayers (those with MAGI below 175% of the exemption) will have their federal income tax liability capped at 25.5% of MAGI above the exemption, directly lowering taxes for many lower- and middle-income households.
A new surcharge on high‑income taxpayers increases federal revenue, which can be used for public services or deficit reduction.
The cost-of-living exemption is indexed to CPI–U, preserving its real value over time and protecting beneficiaries from erosion by inflation.
Capping tax liability for many taxpayers will reduce federal income tax receipts and could increase the federal deficit or force offsetting tax increases or spending cuts that affect all Americans.
The cap creates a cliff effect: taxpayers just above the 175% MAGI threshold get no benefit, so small income increases can produce disproportionately higher taxes for middle-income households.
High‑income individuals will face higher after‑tax costs because of the surcharge.
Based on analysis of 3 sections of legislative text.
Caps income tax for eligible taxpayers at 25.5% of MAGI above an indexed cost‑of‑living exemption and creates a new surcharge on high incomes.
Official title: To amend the Internal Revenue Code of 1986 to make certain modifications in relation to the taxation of income required to fund basic living expenses, and for other purposes.
Introduced March 16, 2026 by Donald Sternoff Beyer · Last progress March 16, 2026
Creates a new alternative maximum tax for lower- and middle-income taxpayers that caps income tax liability at 25.5% of income above a cost-of-living exemption and establishes a separate surcharge framework for high-income taxpayers. The bill defines eligibility by a formula tied to a cost-of-living wage indexed to CPI‑U and applies to tax years beginning after December 31, 2025. The change modifies the Internal Revenue Code by adding an alternative tax calculation for "qualified individuals" (those with modified adjusted gross income below a specified threshold) and by adding a new statutory part to implement a surcharge on high-income individuals. It also includes technical table updates and an instruction that the amendment creating the surcharge is not treated as a change in tax rates for proration rules.