A proposed Congressional bill aims to relieve the tax burden on Social Security beneficiaries while also bolstering a key trust fund’s finances so it remains fully funded for a longer period of time. One lawmaker referred to the bill as a “win-win,” though it likely faces an uphill battle making it into law.
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The bill, dubbed the “You Earned, You Keep It Act,” was reintroduced last week by U.S. Reps. Angie Craig (D-Minn.) and Yadira Caraveo (D-Colo). It proposes to repeal federal taxes on Social Security benefits and delay the looming insolvency of the program’s Old Age and Survivors Insurance (OASI) Trust Fund by two decades to 2054, Think Advisor reported.
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OASI Fund Could Be Depleted in a Decade
The OASI is expected to run out of money by 2033 or 2034. When it does, the program will be solely funded by payroll taxes, which currently cover only 77% of benefits.
As Think Advisor noted, the proposed legislation would keep the trust fund solvent by expanding Social Security payroll taxes to wages above $250,000. In 2024, taxes are imposed only on income up to $168,600. Under the Craig-Caraveo bill, the cap would continue to rise until it hits $250,000 and beyond.
Social Security’s Office of the Chief Actuary found that the bill’s two key provisions would “extend the ability” of the OASI fund to pay scheduled benefits for an additional 20 years, according to a blog from the National Association of Plan Advisors (NAPA).
Meanwhile, federal income taxes on Social Security benefits would also end. Currently, certain Social Security recipients must pay federal income taxes on their benefits, depending on how much outside income they earn.
Social Security’s Office of the Chief Actuary also claimed that the bill would reduce the federal debt by $8.9 trillion over 75 years.
“This bill is a win-win — it’s a tax cut for seniors and a way to ensure more Americans can depend on the Social Security benefits they’ve earned. And on top of that, it’s fiscally responsible,” Craig said in a statement. “I’m leading the charge on this issue in Congress because we need to get money back in the pockets of middle-class Americans.”
Will This Social Security Bill Pass?
Whether it has any chance of passing is another matter. Craig originally introduced the bill in August 2022, but it stalled due to a lack of support. With Congress even more divided now, the bill faces long odds of winning approval.
Even so, it has support among Social Security advocates — including Social Security Works, a progressive-leaning organization that aims to protect and expand Social Security and similar programs.
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This article originally appeared on GOBankingRates.com: Social Security: ‘Win-Win’ Bill To Cut Federal Taxes Would Extend Funds to 2054