Sponsor
Ruben Gallego
Senator · D-AZ
Senator · D-AZ
Official title: Amend the Internal Revenue Code of 1986 to repeal the inclusion in gross income of social security benefits, and for other purposes.
Introduced September 4, 2025 by Ruben Gallego · Last progress September 4, 2025
The bill reduces taxes and paperwork for many Social Security beneficiaries and protects means-tested program eligibility, while shifting costs to the federal budget and introducing new administrative burdens and distributional trade-offs for employers, some workers, and taxpayers.
Seniors and other Social Security beneficiaries no longer have to include Social Security benefits in taxable income, lowering federal tax bills and simplifying annual tax filing for beneficiaries.
Social Security, Railroad Retirement, and HI trust funds are made whole via annual Treasury payments equal to the lost transfers, protecting benefit funding streams and helping preserve scheduled benefit funding.
People who first become eligible after 2025 with earnings above $250,000 receive higher PIA credits for excess earnings, increasing future Social Security benefit amounts for higher earners.
Federal taxpayers bear higher near- and long-term costs because Treasury will make ongoing payments to replace lost transfers to trust funds, shifting costs onto general federal revenues and potentially increasing deficits.
The statutory make-whole payments depend on future congressional appropriations and could be altered or discontinued, creating political risk that would expose beneficiaries to trust-fund funding changes despite the bill's language.
Employers will face increased compliance complexity and administrative costs to track per-employee $250,000 thresholds, successor aggregation, and compute new cross-employer liabilities.
Based on analysis of 4 sections of legislative text.
Removes federal income tax on Social Security benefits, adjusts payroll-tax wage rules with a $250,000 cap, adds a high-earnings bend point for post‑2025 benefits, and directs Treasury to compensate trust funds.
Eliminates federal income taxation of Social Security benefits for taxable years after enactment, and directs annual Treasury payments to make Social Security and Railroad Retirement trust funds whole for the lost transfers. It changes how “wages” are defined for payroll-tax purposes, adding a $250,000 floor and new aggregation rules so some high-dollar pay can become subject to payroll taxes when the statutory Social Security contribution base is below $250,000. It also revises the Social Security benefit formula for people who first become eligible after 2025 by adding a new bend point that applies an added benefit calculation for earnings above a defined threshold tied to a $250,000 rule, while protecting means-tested benefits calculations for Medicaid, SSI, and CHIP recipients from increases based solely on the new benefit computation.