HR-1040-119
Referred to the House Committee on Ways and Means.
Sponsored by Thomas Massie (R-KY)
What it does
This bill would eliminate the federal income tax on Social Security benefits by terminating Section 86 of the Internal Revenue Code, which currently taxes up to 85% of benefits for higher-income recipients. It would also appropriate funds from the general Treasury each year to reimburse the Social Security and Railroad Retirement trust funds for the revenue lost from this repeal, and states a nonbinding "sense of Congress" that tax increases should not be used to fund this reimbursement.
Who benefits
Social Security beneficiaries with income above the current taxation thresholds (individuals earning over $25,000 or couples over $32,000 combined income), who make up roughly 40-50% of beneficiaries and currently pay taxes on part of their benefits. Higher-income retirees would see the largest dollar savings, since the tax applies progressively.
Who is hurt
General federal taxpayers and future generations who would bear the cost of the trust fund reimbursement, since the bill provides no offsetting revenue source despite its stated intent to avoid tax increases. Fiscal watchdogs and beneficiaries of other federal programs may see pressure for spending cuts or increased federal borrowing if the reimbursement is not otherwise funded, and the long-term solvency of the Social Security and Railroad Retirement trust funds could be indirectly affected by reliance on general revenue transfers instead of dedicated tax income.
Supporters argue
Supporters argue that Social Security benefits are funded by payroll taxes already paid during a worker's career, so taxing those benefits again in retirement amounts to double taxation. They contend that seniors on fixed incomes are particularly burdened by this tax, especially as inflation erodes purchasing power, and that the bill's hold-harmless provision protects trust fund solvency by replacing lost revenue dollar-for-dollar from general funds.
Opponents argue
Opponents argue that repealing the tax primarily benefits higher-income retirees, since only those above certain income thresholds pay tax on benefits in the first place, making the change regressive rather than broadly helpful to low-income seniors. They contend the bill offers no funding mechanism beyond a nonbinding sense of Congress against tax increases, meaning the multi-billion-dollar annual cost would likely increase the federal deficit or require future spending cuts elsewhere.
Constitutional context
Congress has broad authority under the Taxing and Spending Clause (Art. I, §8, cl. 1) and the Sixteenth Amendment to define what counts as taxable income, including the discretion to exclude certain income like Social Security benefits from taxation; no landmark case restricts Congress's power to narrow the tax base in this way.
Checks and balances
Congress exercises its core taxing and appropriations power by both repealing a tax and appropriating offsetting funds; the President retains veto power, and future Congresses could amend or repeal this law, including the trust fund reimbursement mechanism.
Historical precedent
Social Security benefits taxation was first introduced in 1983 and expanded in 1993; this bill would reverse those changes, though no prior full repeal of the tax has been enacted.