Working Americans’ Tax Cut Act

Bill Number

S. 4083

Origin Chamber

Senate

Congress

119th Congress, Session 2

Policy Area

Taxation

Status

Introduced

Latest Action

2026-03-12: Read twice and referred to the Committee on Finance.

Last Updated

2026-05-01T11:03:33Z

AI-Generated Summary

Purpose

The Working Americans' Tax Cut Act aims to adjust the U.S. tax system by reducing the tax burden on income needed for basic living expenses for low- and middle-income individuals, while increasing taxes on very high-income earners. This is intended to provide relief to working Americans by capping their effective tax rates and funding it through surcharges on the wealthy.

Key Provisions

• Alternative Maximum Tax for Low- and Middle-Income Individuals (Section 2):
• Introduces a new cap on the regular income tax (under Internal Revenue Code Section 1) for "qualified individuals," defined as those with modified adjusted gross income (MAGI—a measure of income that adds back certain exclusions like foreign earnings or untaxed Social Security benefits) below 175% of a cost-of-living exemption.
• The tax cannot exceed 25.5% of the amount by which MAGI exceeds the cost-of-living exemption.
• The cost-of-living exemption is based on an "annualized cost-of-living wage" starting at $46,000 (adjusted annually for inflation using the Consumer Price Index for All Urban Consumers, or CPI-U, published by the Bureau of Labor Statistics):
• Single filers: 100% of the wage ($46,000 base).
• Joint filers: 200% ($92,000 base).
• Head of household: 140% ($64,400 base).
• Excludes certain dependents (as defined under existing tax rules for standard deductions).
• Applies to tax years beginning after December 31, 2025.

• Surcharge on High-Income Individuals (Section 3):
• Imposes an additional tax on non-corporate taxpayers (individuals, estates, and trusts) based on MAGI (adjusted gross income minus certain investment interest deductions):
• 5% on MAGI between $1 million and $2 million.
• 10% on MAGI between $2 million and $5 million.
• 12% on MAGI over $5 million.
• Thresholds adjust annually for inflation using CPI-U.
• For joint filers, thresholds increase by 50% (e.g., $1.5 million to $3 million for the first tier).
• Special rules:
• Reduces thresholds for U.S. citizens or residents abroad by amounts excluded from income (e.g., foreign earned income).
• Exempts charitable trusts (those fully dedicated to charitable purposes).
• The surcharge does not count as a regular income tax for purposes of tax credits or the alternative minimum tax (AMT—a parallel tax system to ensure high earners pay a minimum amount).
• Applies to tax years beginning after December 31, 2025.

Significant Changes to Existing Law

• Adds a new Section 1A to the Internal Revenue Code, creating an alternative tax calculation that limits the effective rate for lower earners, which does not exist in current law (where tax rates can reach up to 37% progressively).
• Introduces a new Part VIII with Section 59B for high-income surcharges, layering extra taxes on top of existing rates without altering the core progressive brackets (10%–37%).
• Both changes incorporate automatic inflation adjustments tied to CPI-U, unlike some fixed thresholds in current law.
• Explicitly states the surcharge is not a "rate change" under Section 15, avoiding potential transitional rules for tax rate adjustments.

Potential Impacts

• On Citizens: Low- and middle-income individuals (up to roughly $80,500–$161,000 depending on filing status and inflation) could see reduced tax bills, potentially increasing disposable income for essentials like housing and food. High-income earners (over $1 million) face higher overall taxes, which might reduce incentives for high earnings or encourage tax planning (e.g., charitable giving or relocation).
• On Government Agencies: The Internal Revenue Service (IRS) will need to update forms, software, and guidance to administer the new caps, exemptions, and surcharges, potentially increasing administrative costs initially but generating revenue from high earners to offset relief for others.
• On International Relations: Minimal direct impact, though adjustments for U.S. expats (e.g., foreign income exclusions) could affect compliance for Americans abroad and indirectly influence bilateral tax treaties.

Main Stakeholders Affected

• Low- and Middle-Income Workers and Families: Primary beneficiaries through tax caps, including single parents (head of household filers) and joint filers covering basic living costs.
• High-Income Individuals, Estates, and Trusts: Bear the new surcharges, potentially affecting executives, investors, and wealthy retirees.
• Charitable Organizations: Indirectly benefit from exemptions for dedicated trusts, encouraging philanthropy.
• IRS and Taxpayers Generally: All filers must adapt to new calculations; low-income groups gain relief, while high earners may seek deductions or credits more aggressively.

Notable Legal, Constitutional, or Political Implications

• Legal: Enhances progressivity in the tax code by targeting relief and surcharges based on income levels, aligning with existing framework but requiring IRS rulemaking for implementation details (e.g., MAGI calculations). The surcharge's exclusion from credits and AMT simplifies interactions but could lead to litigation over definitions like "modified adjusted gross income."
• Constitutional: Supports the Sixteenth Amendment's allowance for income taxes without apportionment; the tiered structure is unlikely to raise equal protection concerns, as it mirrors upheld progressive taxation (e.g., similar to capital gains rates).
• Political: Represents a shift toward redistributive policy, potentially increasing federal revenue (estimates not provided in bill) to fund social programs without broad rate hikes. It may spark debates on fairness, economic growth, and inflation indexing, influencing future tax reform amid partisan divides on wealth inequality.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Sen. Van Hollen, Chris [D-MD]

Cosponsors (20)

Sen. Kelly, Mark [D-AZ], Sen. Gillibrand, Kirsten E. [D-NY], Sen. Booker, Cory A. [D-NJ], Sen. Kim, Andy [D-NJ], Sen. Durbin, Richard J. [D-IL], Sen. Sanders, Bernard [I-VT], Sen. Merkley, Jeff [D-OR], Sen. Coons, Christopher A. [D-DE], Sen. Blumenthal, Richard [D-CT], Sen. Schatz, Brian [D-HI], Sen. Baldwin, Tammy [D-WI], Sen. Hirono, Mazie K. [D-HI], Sen. Heinrich, Martin [D-NM], Sen. King, Angus S., Jr. [I-ME], Sen. Markey, Edward J. [D-MA], Sen. Welch, Peter [D-VT], Sen. Schiff, Adam B. [D-CA], Sen. Blunt Rochester, Lisa [D-DE], Sen. Gallego, Ruben [D-AZ], Sen. Hickenlooper, John W. [D-CO]

Recent Actions

• 2026-03-12: Read twice and referred to the Committee on Finance.
• 2026-03-12: Introduced in Senate

Bill Versions

• Working Americans’ Tax Cut Act — issued 2026-03-12 — PDF (8 pages)

Related Bills

• H.R. 7937 (119th Congress)