Lawmakers propose to eliminate taxes on Social Security, extend health care tax credits

Lawmakers introduced two pieces of legislation in Congress this week to eliminate taxes on Social Security benefits and extend the premium tax credits for health insurance for one year, addressing gaps in the recently passed One Big Beautiful Bill Act.

Sen. Ruben Gallego, D-Arizona, introduced the You Earn It, You Keep It Act to eliminate federal taxes on Social Security benefits, but also avoid affecting the Social Security Trust Fund by expanding the Social Security payroll tax to covered earnings above $250,000 a year. Companion legislation was introduced in the House by Rep. Angie Craig, D-Minnesota.

The OBBBA, which President Trump signed into law on July 4, includes a new deduction allowing taxpayers who are age 65 and older to claim an additional deduction of $6,000 (or $12,000 for married couples), in addition to the current additional standard deduction for seniors under existing law. The deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers), and to qualify for the additional deduction, a taxpayer has to reach age 65 on or before the last day of the taxable year. However, the tax break falls short of eliminating taxes on Social Security, one of Trump’s campaign promises last year.

“Like a lot of Americans, I’ve been paying into Social Security since my first job at 14,” Gallego said in a statement Thursday. “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. Trump claimed he ended taxes on Social Security. My bill actually does it. Permanently.”

The bill has attracted support from two advocacy groups: the Senior Citizens League and Social Security Works. 

While that bill was introduced only by Democrats, a bipartisan bill emerged Thursday that would extend the premium tax credits provided under the Affordable Care Act for one more year. Unlike many of the other tax breaks that were extended and expanded in the OBBBA, there was no provision for extending the premium tax credits for buying health insurance on the Obamacare exchanges. Otherwise the tax credit is slated to expire by the end of this year. 

Rep. Jen Kiggans, R-Virginia, and Tom Suozzi, D-New York, introduced the Bipartisan Premium Tax Credit Extension Act, to protect families, seniors, and small business owners from massive health care premium increases. 

“As a nurse practitioner, military spouse and mom, I understand firsthand how critical affordable health care is for working families,” Kiggans said in a statement. “In Congress, I’ve made it my mission to ensure Virginians—especially our seniors, small business owners and middle-class families—aren’t blindsided by skyrocketing costs they can’t afford. While the enhanced premium tax credit created during the pandemic was meant to be temporary, we should not let it expire without a plan in place. My legislation will protect hardworking Virginians from facing health insurance bills they can’t afford, thus losing much-needed access to care.”

The premium tax credit was established by the ACA in 2014 to help people afford health insurance purchased through the ACA’s marketplaces. The eligibility rules were expanded and its amounts increased by the American Rescue Plan for 2021-2022, removing the income cap and increasing the subsidy for all eligible households to help during the pandemic. The Inflation Reduction Act of 2022 extended these enhanced subsidies through 2025, but they’re set to expire at the end of 2025. Without the extension, the lawmakers noted, millions of people could see their premiums increase by over $11,000 a year. 

“New Yorkers, including 17,000 of my constituents, rely on the ACA’s enhanced premium tax credits to afford their health insurance,” Suozzi said in a statement. “At a time when the cost of living is skyrocketing and Americans are concerned about being able to afford basic necessities, we cannot allow them to face thousands of dollars of health insurance premium increases if these tax credits expire. This is too important to wait until the last second to think about solutions. I will always work across the aisle to find a middle ground that solves the problems Americans are worried about.”

Cosponsors include Rob Bresnahan, R-Pennsylvania, Juan Ciscomani, R-Arizona, Don Davis, D-North Carolina, Brian Fitzpatrick, R-Pennsylvania, Carlos Gimenez, R-Florida, Marie Gluesenkamp Perez, D-Washington, Jared Golden, D-Maine, Jeff Hurd, R-Colorado, Tom Kean, R-New Jersey, Young Kim, R-California, Mike Lawler, R-New York, Maria Salazar, R-Florida and David Valadao, R-California.