Sponsors (13)
The bill trades lower, protected tax liabilities for many low- and middle-income households (via a capped, CPI-indexed exemption) against reduced receipts, added complexity, and higher taxes on high earners — shifting tax burdens while creating budgetary and administrative trade-offs.
Low- and middle-income taxpayers (those with MAGI below 175% of the exemption) will have their federal income tax liability limited by a 25.5% cap on taxable MAGI above the exemption, lowering taxes for many households.
Taxpayers (especially middle-class families) will see the exemption indexed to CPI–U, preserving the real value of the cost-of-living exemption over time.
High‑income taxpayers will face an additional surcharge, increasing federal revenue that can be used for public services or deficit reduction.
Capping federal income taxes for many taxpayers will lower federal receipts and could increase the budget deficit or require offsetting tax increases or spending cuts that affect all Americans.
Households just above the MAGI cutoff (≥175% of the exemption) receive no benefit and may face a sharp 'cliff' where a small income increase eliminates the cap, harming near‑threshold families.
High‑income individuals will face higher tax bills due to the surcharge, increasing their after‑tax costs.
Based on analysis of 3 sections of legislative text.
Caps income tax for eligible filers at 25.5% of MAGI above a cost-of-living exemption and adds a surcharge on high-income individuals.
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 and a new statutory part to add a surcharge on very high-income individuals, and indexes a defined cost-of-living wage to calculate an exemption. For eligible "qualified individuals," the bill caps income tax at 25.5% of MAGI above a cost-of-living exemption (which is based on an annualized cost-of-living wage of $46,000 indexed to CPI–U and scaled by filing status). The legislation also adds a separate part to the Internal Revenue Code to impose a surcharge on high-income taxpayers and makes technical table updates. The rules apply to taxable years beginning after December 31, 2025. Definitions for modified adjusted gross income and the cost-of-living exemption are provided, and the bill clarifies that adding the new surcharge part is not treated as a tax-rate change for certain proration rules under current law.