New Bill Would Eliminate Income Taxes for Nearly 130 Million Americans

For millions of Americans, federal income taxes take a noticeable bite out of each paycheck. A newly proposed bill aims to change that — potentially allowing you to keep more of what you earn.

Lawmakers say the plan could eliminate federal income taxes for tens of millions of workers while reducing the burden for many more.

Here's what the proposal includes, who it could benefit, and why it's getting attention right now.

Some Senate Democrats want to eliminate federal income tax for millions

A group of Senate Democrats has introduced legislation that would remove federal income taxes for a large portion of low- and middle-income Americans. The proposal, called the Working Americans' Tax Cut Act, was introduced on March 12 by Senators Chris Van Hollen, Mark Kelly, Kirsten Gillibrand, Cory Booker, and Andy Kim, along with Representative Don Beyer in the House

Supporters say the bill could provide permanent tax relief to nearly 130 million people. The goal is to align federal tax policy more closely with the real cost of living across the country. If enacted, it would represent one of the most significant changes to the federal tax system in decades.

Working Americans' Tax Cut Act explained

At its core, the proposal ties tax liability to estimated living costs, effectively shielding lower-income earners from federal income taxes.

Here's how it would work:

• Individuals earning up to about $46,000 — the estimated median cost of living for a single adult — would owe no federal income tax.
• For incomes between $46,000 and $80,500, taxes would be reduced through a phased system.
• Heads of household would receive a higher exemption of about $64,400, while married couples filing jointly could exempt up to $92,000.
• A single filer earning $50,000 could see an estimated tax cut of about $2,800.
• A family of four earning $95,000 could see savings of roughly $6,000.

These benefits gradually phase out at higher income levels — up to roughly $80,500 for individuals, $112,700 for heads of household, and $161,000 for married couples. The structure is designed to ensure that people earning near or below basic living costs are not taxed on income needed for essentials.

Millionaires could see higher taxes if the Working Americans' Tax Cut Act becomes law

To offset the cost of these tax cuts, the bill proposes new surtaxes on high-income households. According to lawmakers, nearly 130 million people, including more than 25 million children, would benefit from lower taxes under the plan.

The proposal would introduce:

• A 5% surtax on income above $1 million for individuals ($1.5 million for couples)
• A 10% surtax on income above $2 million ($3 million for couples)
• A 12% surtax on income above $5 million ($7.5 million for couples)

These additional taxes would apply to both wages and investment income. The Yale Budget Lab estimates the surtax could impact about 615,000 tax filers and raise roughly $1.46 trillion over 10 years.

What sponsors of the Working Americans' Tax Cut Act are saying

Supporters argue the bill addresses a growing affordability crisis for working households.

"Far too many Americans are working hard for their paychecks but still having trouble making ends meet … 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," said Senator Chris Van Hollen.

"It's unacceptable that while so many are struggling to afford everyday expenses … this tax proposal delivers real relief to working Americans," said Senator Andy Kim.

Proponents say the bill is designed to reflect modern economic realities, especially rising housing, food, and health care costs.

Organizations that support the Working Americans' Tax Cut Act

The proposal has received backing from a wide range of advocacy and labor organizations. Supporters include groups such as the AFL-CIO, American Federation of Teachers (AFT), National Education Association (NEA), Americans for Tax Fairness, Oxfam US, and Public Citizen.

These organizations generally support policies aimed at reducing income inequality and providing financial relief to working households. Their endorsement signals broader support among labor groups and economic policy advocates.

Why the potential passage of this bill could have such a large impact on many Americans

If passed, the bill could significantly increase take-home pay for millions of households, especially those earning near or below the median cost of living. For many families, eliminating federal income tax liability could free up thousands of dollars annually.

That extra income could be used to cover essentials, pay down debt, or build savings, areas where many middle-class and lower-income households may struggle.

For retirees and those approaching retirement, the proposal could also reduce pressure on fixed incomes and help make everyday expenses more manageable.

Bottom line

The Working Americans' Tax Cut Act aims to reshape how federal income taxes are applied, potentially eliminating them entirely for millions of Americans while reducing them for many more.

While the proposal faces an uncertain path in Congress, it highlights a growing push to rethink how taxes affect everyday households — and how policy changes could help people get ahead financially.

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