H.R.2266 - Reducing Excessive Taxation and Inefficiencies by Reforming Elder Exemptions to Support Fairness, Inflation Relief, and Simpler Taxes Act; RETIREES FIRST Act (119th Congress)
Summary
H.R.2266, the RETIREES FIRST Act, proposes amendments to the Internal Revenue Code of 1986, specifically targeting the taxation of Social Security benefits. The bill aims to increase the threshold amounts for including these benefits in a taxpayer's gross income. This adjustment seeks to provide tax relief for seniors and simplify the tax process.
The bill introduces inflation adjustments to the base amounts and ensures that Social Security trust funds are held harmless by appropriating funds to offset any reduction in transfers due to these amendments. Furthermore, it mandates a rescission of non-security discretionary appropriations to cover the cost of the tax relief, starting in fiscal year 2027.
Finally, the Office of Management and Budget (OMB) is required to publish annual reports detailing the rescissions made under this act, promoting transparency in the reallocation of funds.
Expected Effects
The primary effect of H.R.2266 would be to reduce the amount of Social Security benefits subject to income tax for many retirees. This would lead to increased disposable income for those affected.
However, the bill also mandates cuts to non-security discretionary spending to offset the revenue loss. This could lead to reduced funding for various government programs.
The changes would be implemented for taxable years beginning after December 31, 2025, and the rescissions would begin in fiscal year 2027.
Potential Benefits
- Tax Relief for Seniors: Increases the threshold for taxing Social Security benefits, potentially lowering the tax burden on retirees.
- Inflation Adjustment: Adjusts the threshold amounts for inflation, preventing bracket creep and maintaining the real value of the tax relief over time.
- Simpler Taxes: Aims to simplify the tax process for seniors by reducing the amount of Social Security benefits subject to taxation.
- Protects Social Security Trust Funds: Ensures that Social Security trust funds are held harmless by appropriating funds to offset any revenue loss.
- Increased Disposable Income: Provides retirees with more disposable income, which could stimulate local economies.
Most Benefited Areas:
Potential Disadvantages
- Cuts to Discretionary Spending: Mandates rescissions of non-security discretionary appropriations, potentially impacting funding for various government programs.
- Potential for Program Cuts: The reallocation of funds could lead to cuts in areas such as education, research, or infrastructure.
- Complexity in Implementation: The inflation adjustment and rescission mechanisms could add complexity to the budget process.
- Uncertainty in Long-Term Impact: The long-term effects on government finances and program funding are uncertain and depend on future economic conditions.
- Potential for Inequitable Distribution: The benefits may disproportionately favor higher-income retirees, depending on the specific income thresholds.
Constitutional Alignment
The bill's alignment with the Constitution is primarily related to Congress's power to tax and appropriate funds, as outlined in Article I, Section 8. This section grants Congress the power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States.
The bill's provisions for appropriating funds to protect Social Security trust funds and rescinding discretionary appropriations fall under this constitutional authority. However, the specific allocation of funds and potential impacts on various programs could raise questions about whether the bill effectively promotes the general welfare.
Furthermore, the bill does not appear to infringe on any individual liberties or rights protected by the Bill of Rights.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).