A Senate bill that would eliminate federal income tax on Social Security benefits has spent a full year sitting untouched in committee, even as backers keep promoting it as an answer for retirees squeezed by rising costs. The bill would replace the lost revenue by extending Social Security’s payroll tax to wages above $250,000, a design meant to blunt the usual objection that cutting a tax without new revenue speeds up the program’s funding shortfall. Nothing in its yearlong record suggests a vote is near.
What the You Earned It, You Keep It Act Would Do
The bill, S.2716, formally titled the You Earned It, You Keep It Act, would strike Social Security benefits from a beneficiary’s gross income entirely, ending the federal income tax that currently applies to a portion of many retirees’ checks. It would repeal the layered system Congress created in 1983 and expanded in 1993, under which up to 85 percent of a beneficiary’s Social Security income becomes taxable once combined income, adjusted gross income plus nontaxable interest plus half of Social Security benefits, crosses set thresholds.
Those thresholds, according to the Internal Revenue Service’s guidance on Social Security income, have never moved since Congress set them decades ago: up to 50 percent of benefits becomes taxable once an individual’s combined income passes $25,000, or a married couple’s passes $32,000, and up to 85 percent becomes taxable above $34,000 for an individual or $44,000 for a couple filing jointly. Because those dollar figures were never indexed to inflation, a growing share of retirees have crossed into taxable territory over time even though the underlying formula has not changed.
The result is a form of bracket creep unique to Social Security: a benefit raised by the program’s own annual cost-of-living adjustment can push a retiree’s combined income past a threshold that has not moved in decades, so the raise meant to keep pace with inflation ends up increasing the retiree’s tax bill instead.
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How the Bill Would Pay for the Cut
Removing Social Security benefits from taxable income would cut off a revenue stream that currently helps fund the program, so the bill pairs the repeal with a new payroll tax on high earners. Social Security’s payroll tax currently stops applying once a worker’s wages cross a yearly cap, a limit the Social Security Administration’s 2026 fact sheet sets at $184,500 for this year; a worker earning $300,000 this year pays the tax on only the first $184,500 of it. Gallego’s bill would apply the payroll tax to all covered wages above $250,000 instead, taxing the highest earners on income that currently escapes the tax once they clear the existing cap, while leaving wages between the current cap and $250,000 untouched.
Gallego’s office has said the added revenue would let the Social Security Administration keep paying full scheduled benefits through 2058, a projection tied to the trust funds’ own long-range outlook. That figure comes from the bill’s sponsors, not from an independent actuarial score, and no separate score of S.2716 itself has been published.
Why the Bill Has Not Moved in a Year
Gallego introduced S.2716 on September 4, 2025, and it was read twice and referred to the Senate Finance Committee, the standard first step for a tax bill. A year later, the committee has scheduled no markup and held no hearing on it. A companion bill introduced in the House by Rep. Angie Craig in April 2026 has followed the same path, referred to committee with no further action recorded.
Every senator who has signed onto the bill is a Democrat, in a Congress where Republicans hold majorities in both chambers and control committee agendas. Without Republican cosponsors or a change in which party sets the calendar, the bill has no clear route to a vote this Congress, regardless of how it polls with retirees.
What Beneficiaries Face While the Bill Sits
Because the bill has not advanced, the tiered rules on taxing Social Security benefits still apply for the 2026 tax year and will keep applying unless Congress acts. A retiree whose combined income lands between $25,000 and $34,000 individually, or between $32,000 and $44,000 for a married couple, still owes tax on up to half of the benefit; above those higher figures, up to 85 percent of the benefit still counts as taxable income, exactly as it has since the thresholds were last set.
The bill’s status will not change again on its own. Absent a markup, a hearing, or a broader tax package that folds the idea in, S.2716 stays exactly where it has sat since the day after Labor Day weekend last year: read twice, referred to committee, and waiting. Retirees who like the idea of a full repeal have no filing decision to make because of it; the deduction does not exist yet, and nothing in the bill’s committee history points to a near-term change in that fact.
This article was produced with the assistance of AI and reviewed by The Financial Wire editorial team.
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David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
