Sponsors (12)
The bill lowers and preserves taxes for many low- and middle-income households while raising revenue from high earners and introducing fiscal and administrative trade-offs—reducing tax bills for large groups but creating potential revenue shortfalls, cliffs for near-threshold taxpayers, and implementation complexity.
Low- and middle-income taxpayers (those below the exemption threshold) will have their federal income tax liability capped at 25.5% of MAGI above the exemption, directly lowering taxes for many households.
High-income taxpayers will face an additional surcharge, generating new federal revenue that can be used to fund public services or reduce the deficit.
The exemption is indexed to CPI–U, preserving the real value of the cost-of-living exemption over time and preventing gradual erosion of the benefit.
Taxpayers whose income rises above the MAGI threshold (≥175% of the exemption) receive no benefit and may face sharp 'cliffs' where a small income increase eliminates the cap, hurting middle-income households and complicating work/earnings decisions.
The fiscal impact is uncertain and risky: capping liabilities for many taxpayers likely reduces federal income tax receipts, and the surcharge on high earners may not fully offset that loss—raising the chance of higher deficits or the need for future spending cuts or new revenue measures.
Including certain Social Security exclusions in MAGI could push some retirees over the eligibility threshold and reduce their access to the tax cap, harming seniors who expected relief.
Based on analysis of 3 sections of legislative text.
Caps tax for eligible individuals at 25.5% of MAGI above a CPI-indexed cost-of-living exemption and creates a separate surcharge framework for high-income taxpayers.
Introduced March 16, 2026 by Donald Sternoff Beyer · Last progress March 16, 2026
Creates a new alternative tax rule that limits how much eligible individuals pay by capping their tax at 25.5% of their modified adjusted gross income (MAGI) above a CPI-indexed cost-of-living exemption. It also adds a separate statutory part to impose a surcharge on high-income individuals and makes clerical updates to the tax code. The changes apply to taxable years beginning after December 31, 2025.