Democrats introduce bill to eliminate or reduce income taxes

A group of Senate and House Democrats introduced legislation Thursday that would eliminate federal income taxes for Americans who earn less than $46,000 and reduce income taxes for those making between $46,000 and $80,500 per year.

Processing Content

The bill, dubbed the Working Americans’ Tax Cut Act, has little chance of becoming law given Republican control of Congress and the White House, especially in an election year. However, it does provide fodder for talking points during the midterm campaigns, especially in the middle of a tax season that was affected by the passage last year of the One Big Beautiful Bill Act, which Republicans have since rebranded as the Working Families Tax Cuts. Democrats chose a similar name for their new legislation. The bill was unveiled in the Senate by Sen. Chris Van Hollen, D-Maryland, Mark Kelly, D-Arizona, Kirsten Gillibrand, D-New York, Cory Booker, D-New Jersey, and Andy Kim, D-New Jersey, cosponsored by 13 other Democrats and an independent, and introduced in the House by Rep. Don Beyer, D-Virginia. 

“Far too many Americans are working hard for their paychecks but still having trouble making ends meet,” Van Hollen said in a statement. “These Americans who are earning just enough to get by — to meet their basic living expenses — should not have to pay a federal income tax. Our bill would ensure just that — and it would provide a significant tax break to millions of other working Americans, so folks can keep more of their hard-earned money in their pockets.”

The $46,000 cutoff is estimated to be the median cost of living for a single adult with no children in the United States, according to the Living Wage Institute. For individuals with income ranging from $46,000 to $80,500, the legislation would give them a significant tax break as the bill phases out the cost-of-living exemption at 175% of the median cost of living for a single adult with no children. For example, a single person who earns $50,000 a year would typically receive a tax cut of approximately $2,800.

The bill also includes a larger exemption for heads of households, at 140% of the single exemption or $64,400; and for married couples filing jointly, 200% of the single exemption or $92,000. The exemptions would phase out at higher rates, with heads of households making between $64,400 and $112,700 a year and married couples making between $92,000 and $161,000 a year receiving a tax cut under the bill. For example, a family of four who earns $95,000 per year would presumably receive a tax cut of approximately $6,000 due to the cost-of-living exemption. 

According to an analysis by the Institute for Taxation and Economic Policy, nearly 130 million people, including over 25 million children, would receive a tax cut under the bill. To pay for it, the bill would levy a tiered surtax on millionaires, applying an additional 5% tax to the first dollar an individual makes over $1 million and the first dollar a married couple earns over $1.5 million annually. There would also be an additional 10% tax on the first dollar an individual makes over $2 million and a married couple makes over $3 million annually; and an additional 12% tax on the first dollar an individual makes over $5 million and a married couple makes over $7.5 million annually. The surtax would apply equally to wages and salaries as well as to capital gains and other investment income. The Yale Budget Lab estimated such a surtax would impact 615,000 tax filers and raise $1.46 trillion over 10 years.

The bill is supported by a number of labor unions and other organizations, including the AFL-CIO, American Federation of Teachers, Americans for Tax Fairness, Community Change Action, Demos, Get Out the Vote PAC, Indivisible, Institute for Policy Studies, MoveOn, National Education Association, Network Lobby for Catholic Social Justice, Oxfam US, Patriotic Millionaires, People’s Action, Public Citizen, Social Security Works, Strong Economy for All Coalition, SURJ, Take on Wall Street and United for a Fair Economy.