Sponsors (11)
The bill lowers taxes for many low- and middle-income Americans and indexes the exemption to inflation while raising revenue from high earners with a surcharge—but it adds complexity, creates eligibility cliffs, and produces uncertain net effects on federal revenue.
Low- and middle-income taxpayers (those with MAGI below 175% of the exemption) will have their federal income tax capped at 25.5% of MAGI above the exemption, lowering their tax liability.
High-income taxpayers will face an additional surcharge, increasing federal revenue that could be used to fund public services or reduce deficits.
Taxpayers will keep the real value of the cost-of-living exemption over time because the exemption is indexed to the CPI–U.
Many taxpayers will produce lower federal income tax receipts because capping taxes for those under the MAGI threshold reduces federal revenue and could increase deficits or require offsetting tax increases or spending cuts.
Taxpayers with MAGI at or above 175% of the exemption receive no benefit from the cap, and people just above the cutoff could face a sharp 'cliff' where a small income increase eliminates the cap.
High‑income individuals will face higher after‑tax costs because the surcharge increases their tax bills.
Based on analysis of 3 sections of legislative text.
Caps federal income tax for many households at 25.5% of MAGI above a cost‑of‑living exemption and adds a separate surcharge on very high‑income individuals.
Introduced March 16, 2026 by Donald Sternoff Beyer · Last progress March 16, 2026
Creates a new alternative tax cap for many working households by limiting a taxpayer’s income tax to at most 25.5% of the taxpayer’s modified adjusted gross income (MAGI) above a cost-of-living exemption, with income and exemption levels indexed to inflation. It also adds a separate statutory part to impose a surcharge on very high‑income individuals (text of the surcharge not included in the excerpt). The changes apply to tax years beginning after December 31, 2025.