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The bill lowers federal income taxes for many low- and middle-income households (and strengthens family exemptions) while funding progressivity through a surtax on high earners, but it increases tax complexity and raises concerns about revenue loss, administration costs, and fairness around thresholds and retiree treatment.
Low- and middle-income taxpayers (those with MAGI below the threshold) would see their federal income tax liability capped at 25.5% of income above an inflation-indexed exemption, directly lowering tax bills for many households.
High-income individuals would face an additional surtax, generating new federal revenue that can be used to fund programs or reduce deficits.
The bill increases tax progressivity by shifting more of the burden onto wealthier households through the surtax, reducing after-tax inequality.
The cap on tax liability will reduce federal revenue and could increase the federal deficit or require offsets (spending cuts or other tax increases) if not fully offset elsewhere.
Creating a new alternative tax calculation and adding surtax rules increases filing complexity and compliance burden for taxpayers and raises administrative costs for the IRS and financial institutions.
High-income individuals subject to the surtax will face higher after-tax costs, directly reducing disposable income for those taxpayers.
Creates an alternative maximum tax calculation that limits tax for many lower- and middle-income taxpayers to 25.5% of their modified adjusted gross income (MAGI) above a cost‑of‑living exemption, and adds a new surcharge on very high‑income individuals. The bill defines the exemption using a base annualized cost‑of‑living wage ($46,000 indexed to CPI‑U) with different multipliers for filing status, defines who qualifies based on MAGI, and takes effect for taxable years beginning after December 31, 2025.
Introduced March 12, 2026 by Christopher Van Hollen · Last progress March 12, 2026