Democratic Senator Ruben Gallego of Arizona introduced on September 4, 2025, legislation that would end the federal taxation of Social Security benefits permanently. The “You Earn It, You Keep It Act” represents a complete approach to the reform of Social Security taxation beyond the temporary legislation instituted lately by the Trump administration.
Background of Social Security’s taxation rules
Under existing federal income tax law, Social Security beneficiaries might be required to pay taxes on their benefits based on their total income. The taxation system applies a certain formula called “combined income,” which includes adjusted gross income, tax-exempt interest income, and half of Social Security benefits received.
Individual taxpayers with combined income between $25,000 and $34,000 may pay taxes on 50% of their Social Security benefits, while those exceeding $34,000 could be taxed on 85% of their benefits. For married couples filing jointly, $32,000 to $44,000 in combined income will lead to taxation at 50%, while anything above $44,000 will lead to taxation at 85%. Approximately one in four Social Security beneficiaries currently pays federal income tax on at least some portion of their benefits.
Main provisions under Gallego’s legislation
The You Earn It, You Keep It Act has two major features that make it distinct from others. Firstly, it would eliminate federal income taxes on all Social Security benefits for all beneficiaries irrespective of the income level of the individual. This is a permanent solution as opposed to the temporary measures put forth in the latest tax legislation.
Secondly, the bill would provide for Social Security’s long-range financial viability by extending the payroll taxation to include earnings above $250,000. Social Security payroll taxes are currently levied only on income below $176,100 in 2025; thus, the high-paid professionals stop contributing to the system halfway through the year.
Comparison with most recent tax laws
Senator Gallego’s plan stands in stark contrast with the Trump administration’s “One Big Beautiful Bill,” which was signed into law in July 2025. Whereas the recent legislation allows temporary tax relief through enhanced deductions for senior citizens aged 65 and older, it does not entirely abolish the taxation of Social Security.
The current law allows for a temporary $6,000 deduction ($12,000 for married couples) from 2025 through 2028 with income caps of $75,000 for singles and $150,000 for couples. Tax policy analysts emphasize that this creates a superfluous deduction but doesn’t de facto change the basic taxation structure on Social Security benefit income.
Projected financial impact and trust fund implications
According to analyses conducted by Social Security’s chief actuary, Gallego’s proposals could extend the Social Security trust fund’s ability to pay full benefits up to 2058. This marks an improvement over the current estimates showing that the combined trust funds would be depleted by 2034.
An extended payroll tax base would bring massive revenues into the Social Security system. The legislation addresses what supporters view as a fundamental inequity whereby wealthy individuals “hardly pay into the system” by requiring high earners to contribute to income above $250,000.
Support and opposition
The bill receives strong backing from advocacy groups, especially from The Senior Citizens League, which has worked tirelessly toward the elimination of imposition of taxation on Social Security benefits. Executive Director Benton termed the proposal “a commonsense step to ensure older Americans can keep more of what they’ve earned.”
Representative Angie Craig from Minnesota introduced a companion bill in the House of Representatives, building on similar bills she has put forth since 2024. This also reflects propositions made from Republican Rep. Thomas Massie, who has introduced the Senior Citizens Tax Elimination Act over and over again since 2012.
Since then, the proposal met with mounting political opposition. The recent “One Big Beautiful Bill” had scant Republican support in the House, and some Republicans expressed their worry regarding the fiscal impacts. Opponents are worried that the elimination of Social Security taxes without any other revenue source would worsen the long-term financial viability of the program.
Social Security financial challenges
The introduction of Gallego’s legislation comes at a pivotal moment for the financial health of Social Security. Projections in the 2025 Trustees Report indicate that the Old-Age and Survivors Insurance trust fund will be exhausted in 2033 at which point services will be able to pay only 77% of scheduled benefits.
A recent examination shows that the Trump administration’s tax bill has in fact sped up the timetable, translating the date of depletion of the combined trust fund from the last quarter of 2034 to the first quarter of 2034. This presents additional urgency for lawmakers to secure the long-term sustainability of the program.
