You Earned It, You Keep It Act
- Bill Number
- H.R. 2909
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-04-14: Referred to the Committee on Ways and Means, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
- Last Updated
- 2026-03-21T08:05:52Z
AI-Generated Summary
Purpose of the Legislation
The "You Earned It, You Keep It Act" (H.R. 2909) aims to make Social Security more equitable and sustainable by eliminating federal income taxes on Social Security benefits, increasing the amount of high earners' income subject to Social Security payroll taxes (up to $250,000 annually), and incorporating a portion of those high earnings into the benefit calculation formula. This is intended to protect retirees from taxation on benefits while generating additional revenue from wealthier individuals to support the program's long-term funding.
Key Provisions
- Repeal of Taxation on Social Security Benefits (Section 2):
- Ends the inclusion of Social Security benefits in taxable gross income starting the year after enactment.
- Directs the U.S. Treasury to transfer funds to Social Security trust funds (including those for retirement, disability, hospital insurance, and railroad retirement) to offset lost tax revenue, ensuring no reduction in program funding.
- Expansion of Taxable Wages and Self-Employment Income (Section 3):
- For calendar years after 2025, removes the current cap on wages subject to Social Security payroll taxes (the "contribution and benefit base," currently around $168,600 for 2024) if it is below $250,000; instead, taxes wages up to $250,000.
- Applies similar rules to self-employment income, taxing it up to $250,000 minus any wages already taxed.
- Includes special rules for workers with multiple employers to prevent under-taxation (e.g., a new Section 3103 imposes additional employee-paid tax if total wages exceed $250,000 across employers, with coordination for refunds).
- Extends these changes to railroad retirement taxes.
- Artificially increases the "national average wage index" (used for adjusting benefits and taxes) by 0.7% to 0.9% annually starting in 2026 to account for broader wage inclusion.
- Inclusion of High Earnings in Benefit Calculations (Section 4):
- For individuals becoming eligible for Social Security old-age or disability benefits after 2025, adds 2% of "excess average indexed monthly earnings" (earnings above $250,000 or the contribution base, whichever is higher) to the primary insurance amount (the base benefit level).
- Defines "excess" earnings separately from standard wages/self-employment income, applying only to post-2025 high earnings.
- Protects eligibility and benefit amounts for Supplemental Security Income (SSI), Medicaid, and Children's Health Insurance Program (CHIP) recipients by disregarding the increased Social Security benefits in their income calculations.
Significant Changes to Existing Law
- Taxation of Benefits: Overturns Section 86 of the Internal Revenue Code, which currently taxes up to 85% of Social Security benefits for higher-income recipients based on combined income thresholds.
- Payroll Tax Caps: Replaces the uniform cap under Sections 3121 and 1402 of the Internal Revenue Code with a $250,000 threshold for Social Security taxes (Old-Age, Survivors, and Disability Insurance or OASDI), while preserving Medicare taxes on all income. This shifts from taxing only up to the annual base to taxing a fixed higher amount for high earners.
- Benefit Formula: Modifies Section 215 of the Social Security Act to include a small portion (2%) of earnings over $250,000 in the Average Indexed Monthly Earnings (AIME) calculation, making benefits slightly more progressive without fully integrating all high earnings.
- Trust Fund Protections: Introduces direct appropriations to maintain trust fund transfers, a new mechanism not in current law.
- Wage Index Adjustment: Alters Section 209(k) of the Social Security Act with fixed percentage increases to the wage index, diverging from the historical method based on actual wage growth.
These changes apply starting after 2025 for most provisions, with immediate effect for the benefit tax repeal.
Potential Impacts
- On Citizens: Retirees and beneficiaries (about 70 million Americans) would no longer pay income taxes on Social Security benefits, potentially increasing their after-tax income by thousands annually for middle- and upper-income recipients. High earners (those making over $250,000) would pay more in payroll taxes (up to an additional ~$10,000+ per year per person at the 12.4% combined rate) but receive modestly higher benefits (e.g., ~2% uplift on excess earnings). Self-employed individuals face similar tax increases but gain from untaxed benefits.
- On Government Agencies: The Social Security Administration (SSA) would see increased revenue for trust funds, potentially extending solvency beyond current projections (depletion around 2035), but requires administrative updates for new wage tracking and benefit formulas. The Internal Revenue Service (IRS) must implement new withholding, reporting, and refund rules for multiple-employer scenarios, increasing complexity. Treasury handles offsetting transfers, adding fiscal oversight.
- On International Relations: Minimal direct impact, though it could indirectly affect U.S. workers abroad (via Section 3121(l) agreements) by applying the $250,000 cap consistently.
Overall, the bill could add billions in annual revenue to Social Security (estimates vary, but potentially $100-200 billion over a decade from lifted caps) while reducing federal income tax collections by $20-50 billion yearly from untaxed benefits.
Main Stakeholders Affected
- Social Security Recipients and Retirees: Primary beneficiaries of untaxed benefits, especially those with moderate to high combined incomes.
- High-Income Workers and Self-Employed Individuals: Bear higher payroll taxes on income up to $250,000, with slight benefit increases.
- Employers: Must adjust payroll withholding and reporting for wages over the current base, potentially increasing administrative costs; they pay half of the payroll tax (6.2%).
- Low-Income Beneficiaries: Protected via harmless provisions for SSI, Medicaid, and CHIP, ensuring no loss of eligibility.
- Government Entities: SSA (fund management), IRS (tax enforcement), and Treasury (appropriations); broader federal budget affected by revenue shifts.
- Railroad Workers: Included via parallel changes to retirement taxes, impacting ~200,000 retirees.
Notable Legal, Constitutional, or Political Implications
- Legal: The bill relies on Congress's taxing and spending powers under Article I of the Constitution, with no apparent challenges. It introduces novel "hold harmless" rules for means-tested programs, potentially setting precedents for coordinating Social Security with welfare laws. Administrative feasibility may lead to IRS/SSA rulemaking, risking disputes over multi-employer calculations.
- Constitutional: No direct issues, as it adjusts existing tax and benefit structures without infringing on rights; the $250,000 threshold is a policy choice, not a constitutional cap.
- Political: Promotes progressivity by targeting high earners, appealing to advocates for Social Security expansion, but could face opposition from business groups over tax hikes and conservatives concerned about trust fund interventions. As a revenue-neutral shift (via offsets), it avoids major deficit impacts but may spark debates on entitlement reform amid aging demographics. Referred to House Ways and Means and Energy and Commerce Committees, indicating bipartisan interest in fiscal sustainability.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (13)
Rep. Khanna, Ro [D-CA-17], Rep. Pettersen, Brittany [D-CO-7], Rep. Casten, Sean [D-IL-6], Rep. Riley, Josh [D-NY-19], Rep. McGovern, James P. [D-MA-2], Rep. Landsman, Greg [D-OH-1], Rep. McDonald Rivet, Kristen [D-MI-8], Rep. Salinas, Andrea [D-OR-6], Rep. Sorensen, Eric [D-IL-17], Rep. Krishnamoorthi, Raja [D-IL-8], Rep. Magaziner, Seth [D-RI-2], Rep. Escobar, Veronica [D-TX-16], Rep. Latimer, George [D-NY-16]
Recent Actions
- 2025-04-14: Referred to the Committee on Ways and Means, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
- 2025-04-14: Referred to the Committee on Ways and Means, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
- 2025-04-14: Introduced in House
- 2025-04-14: Introduced in House
Bill Versions
- You Earned It, You Keep It Act — issued 2025-04-14 — PDF (18 pages)