A new bill introduced in the House of Representatives aims to eliminate federal taxes on Social Security benefits for seniors beginning in 2025, which the bill’s sponsors say would be paid for by raising the cap on the Social Security payroll tax. That would mean, starting in 2025, Americans earning $250,000 or more would pay a Social Security tax on all of their earnings. The tax is currently capped at $168,800 for 2024.

The bill would repeal the taxation of Social Security benefits and would let the Old-Age, Survivors and Disability Insurance program continue making all payments through 2054, some 20 years longer than the current projection of 2034, when benefits are due to be reduced by 20%, according to a new analysis from Social Security’s chief actuary, Stephen Goss.

The legislation would also reduce the federal debt by $8.9 trillion over 75 years, Goss said.

The bill, called the “You Earned It, You Keep It Act,” has been introduced two years in a row by Democrat Angie Craig of Minnesota.

“This bill is a win-win,” said Craig in a statement. “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. 

“I’m leading the charge on this issue in Congress,” Craig continued, “because we need to get money back in the pockets of middle-class Americans. The You Earned It, You Keep It Act will help us get it done.”

According to Goss, if Congress doesn’t act, only 80% of scheduled benefits could be payable on a timely basis in 2034 after the combined trust fund reserves are depleted. The percentage of payable benefits then declines to 74% by 2097.

For 2024, $168,800 is the limit at which annual earnings are subject to Social Security taxes (that reflects an increase of $8,400 from last year).

The Peter G. Peterson Foundation, a nonpartisan think tank, analyzed the arguments for and against raising or eliminating the cap on Social Security taxes.

Those who are for raising the cap say it would make the Social Security tax less regressive, shore up the Social Security trust funds and fight income inequality.

But opponents say that those paying more are getting less of a stake in their benefits because the link between benefits and taxes is weaker if benefits aren’t increased as well, the foundation says. Critics of the idea also cite the fact that “high-income beneficiaries may also be subject to income taxes on the Social Security benefits they receive,” the foundation said.

The original co-sponsors of the You Earned It, You Keep It Act include Democrats Ro Khanna of California, Yadira Caraveo of Colorado, Don Davis of North Carolina, Mary Peltola of Alaska, Andrea Salinas of Oregon and Hillary Scholten of Michigan.