Tired of Being Taxed Twice? A New Bill Would End Taxes on Social Security for Good

Many retirees feel they’re being “taxed twice” on benefits they already earned. And now, U.S. Sen. Ruben Gallego (D-AZ) has introduced a measure to finally end the tax on Social Security for the more than 55 million beneficiaries who depend on it as a source of income.

It’s a popular promise with high stakes. About half of Social Security recipients pay income tax on their benefits, according to Pew Research, with most of the revenue going back into the Social Security fund to help pay for future payments.

Gallego’s You Earn It, You Keep It Act would end federal income tax on Social Security, shifting the costs to high earners. It would also extend solvency through 2058—a crucial detail as the fund is currently expected to be insolvent as soon as 2034.

For the estimated 22 million seniors living on Social Security alone, this could mean thousands more in their pockets each year for at least the next 33 years.

Why millions of seniors say they’re taxed twice

The tax on Social Security benefits has been controversial from the start. Congress introduced it in 1984 as a solvency fix: Without the revenue, the Social Security trust fund would have run out of money. At the time, only the highest-income retirees paid any federal tax on their benefits. Fewer than 1 in 10 beneficiary families was affected, according to research from the Social Security Administration.

But as wages and benefits grew—and the tax thresholds stayed frozen—more retirees got pulled into the tax net. Today, more than half of Social Security beneficiaries owe some federal tax on their benefits. And that share is projected to keep rising through 2050, according to the Social Security Administration.

For many retirees, the math seems unfair. Workers have already paid into the system for decades with a dedicated payroll tax. Having to then pay federal income tax on their benefits seems, to them, like being taxed twice on the same earnings.

“Like a lot of Americans, I’ve been paying into Social Security since my first job at 14,” Gallego said in a press release. “But despite decades of paying into the system, seniors are still forced to pay taxes on their hard-earned benefits—all while the ultra-wealthy barely pay into the system at all.”

That perception has chipped away at public trust in the program, and now 79% of Americans say they don’t believe they’ll receive their full benefit in retirement, according to an August 2025 survey by the Cato Institute.

You Earn It, You Keep It Act: What it promises

The You Earn It, You Keep It Act would permanently end federal income taxes on Social Security benefits. To make up for the lost revenue, the plan would lift the payroll tax cap for high earners.

While raising taxes might seem like an unpopular choice, 37% of Americans say they support raising taxes to ensure retirees continue to receive full benefits, with 35% saying they’d support borrowing money to solve insolvency issues, according to the same survey from Cato.

Currently, wages above $176,100 are exempt from Social Security taxes. But under this bill, income above $250,000 would once again be taxed. Gallego frames it as a way to ensure that high earners are paying “their fair share” while also making good on the promise of Social Security benefits for retirees.

Backers also say the plan tackles Social Security’s biggest looming crisis: insolvency. By extending the trust fund’s life to 2058, the bill would push back the widely cited 2034 shortfall by more than two decades, giving retirees far more certainty about the program’s future.

The politics are equally pointed. President Donald Trump has claimed he effectively ended taxes on Social Security benefits with the senior deduction passed in the One Big Beautiful Bill Act. However, those benefits don’t evenly apply to all beneficiaries.

“Trump claimed he ended taxes on Social Security,” Gallego said. “My bill actually does it. Permanently.”

U.S. Rep. Angie Craig (D-MN), who introduced the House companion bill, put it even more bluntly: “My common-sense bill puts money back into the pockets of retirees, while reducing the federal debt. It’s a win-win.”

How much could retirees really save?

Right now, Social Security benefits are taxed once retirees cross relatively low income thresholds. A single filer with a combined income above $25,000 may have to pay tax on up to half of their benefits. Above $34,000, as much as 85% of benefits can be taxed. The same rules apply to joint filers at $32,000 and $44,000, according to the bill’s fiscal note. Those thresholds haven’t been adjusted for inflation since the 1980s, which means more seniors are pulled into the tax net every year.

That adds up to thousands of dollars flowing back to the IRS—money retirees thought they’d already paid in. Under the You Earn It, You Keep It Act, those taxes would disappear starting in 2026. Instead of sending a portion of their benefits back to Washington, retirees would keep every dollar of their Social Security check.

The impact could be significant. A retiree collecting about $25,000 a year in benefits who also reports modest outside income could save several thousand dollars annually, depending on their filing status and total income. For households living on the margin, that’s money that could cover utilities, groceries, or months of property tax bills.

But eliminating federal taxes doesn’t erase the bigger shortfall. Social Security alone fully covers basic living expenses in just 10 states for retirees with a paid-off mortgage, according to a recent analysis from Realtor.com®. Everywhere else, retirees face annual gaps ranging from $3,600 to $8,000. 

Cutting taxes shrinks that deficit, but it doesn’t solve it.

The real budget-buster for seniors remains housing costs, which have outpaced benefit growth in many regions. On this front, Gallego has supported the ROAD to Housing Act.

“People are finding that no matter where they go, it’s unaffordable. It’s stopping Americans from achieving that first American dream,” he said in a press release for the bill. “Psychologically, these kids are hurting. Adults are hurting because their parents got a home but they can’t. In some regards they think it’s their fault, but in reality, the market has been so distorted for a lot of reasons.”

The ROAD to Housing Act would incentivize local governments to cut red tape, streamline environmental reviews for small projects, and launch an Innovation Fund to support infrastructure and housing. It also expands access through measures like modernizing financing for modular and manufactured homes, boosts small-dollar mortgages, and strengthens VA and USDA housing programs. 

While economists say it won’t be a game changer on its own, the bipartisan bill could mark a meaningful step toward expanding supply and making homeownership more attainable.

The big question: Will Congress act before 2034?

The politics may be tougher than the math. While the You Earn It, You Keep It Act offers a clear fix, it runs headlong into a bipartisan reality: How can you pass a bill doing something the president is touting he's already effectively done?

But without action, the clock is ticking. The Social Security trust fund is projected to fall short by 2034, forcing automatic benefit cuts of about 20% unless Congress steps in.