The new bill would prevent returned Social Security benefits from being taxed
The ‘Big Money Show’ panel discusses new analysis that shows Social Security and Medicare are headed for bankruptcy and warns that retirees face steep benefit cuts unless Washington acts quickly.
A newly introduced bill would prevent some public sector retirees from being taxed after they become eligible. Social Security Benefits last year.
The bipartisan bill, known as the No Tax on Restored Benefits Act, was introduced by Rep. Lance Gooden, R-Texas, would also create a gross income tax exemption for retroactive, lump-sum Social Security benefit payments paid to certain public sector retirees with pensions who previously had their benefits reduced or eliminated because they did not pay Social Security taxes while they were working.
Following last year’s enactment of Social Security Actwhich allowed benefit payments to go back to retirees.
“First, the federal government shortchanged public servants by withholding Social Security benefits. Now, Washington is trying to tax those benefits,” Gooden told FOX Business. “It’s a slap in the face to teachers, firefighters, law enforcement and others who are dedicated to serving our communities. The No Tax on Restored Benefits Act ends the abuse of retired people in society.”
SOCIAL PROTECTION FEES TO INCREASE FOR SOCIAL PENSION RECIPIENTS
The new bill would aim to prevent a tax effect on those who received lump sum payments under the Social Security Administration. (Mark Felix / The Washington Post)
Rep. Chellie Pingree, D-Maine, is the bill’s lead sponsor and said the Social Security Administration has “really changed” hundreds of thousands of Americans, but it “wasn’t meant to give a ride to widows, low-income seniors and dedicated government workers.” unexpected tax.”
“The No Tax on Restored Benefits Act addresses this problem in a fair, flexible way by protecting people who were under the tax threshold from being unfairly penalized for a single increase, which reverses their earned benefits,” said Pingree.
The bill received support from the National Association of Police Associationsand Executive Director Bill Johnson noted that “retirees are facing a huge tax bill on the same benefits that Congress has worked to restore,” and the new law “will ensure that no public employee will continue to be penalized simply because they chose public service.”
BILLIONS TO RECEIVE HIGHER SOCIAL SECURITY PAYMENTS UNDER NEW LAW
Rep. Lance Gooden, R-Texas, introduced the bill to protect returned Social Security benefits from taxes. (Al Drago/Bloomberg via Getty Images)
The introduction of the No Tax on Restored Benefits Act follows the enactment of the Social Security Protection Act last year, which made certain public sector retirees eligible for reinstatement and was signed into law in January 2025 by then President. Joe Biden.
Eliminated policies known as the Windfall Elimination Provision (WEP) and the Government Pension (GPO) that reduced or eliminated Social Security benefits for workers who receive public pensions and are not covered by Social Security taxes.
Those policies reduced or eliminated Social Security benefits for more than 3.2 million people who received an occupational pension that would not have been covered by Social Security because they did not pay Social Security taxes.
SOME SOCIAL PROTECTION BENEFICIARIES WILL RECEIVE PAYMENTS AS SOON AS FEBRUARY AND MARCH.
Rep. Chellie Pingree, D-Maine, sponsored the Tax Free Repatriated Benefits Act. (Bryan Dozier/Middle East Images/AFP via Getty Images)
Among the groups of people affected are some teachers, firefighters and police in many states; federal employees covered by Public Service Retirement Plan; and people whose work was covered by the foreign social security system.
WEP and GPO policies did not apply to all people in those groups because about 72%. national and local government employees work in roles covered by Social Security and pay into the program. Therefore, retirees will not see an increase in benefits under the Social Security Fairness Act.
Termination of WEP and GPO policies first began in January 2024, and the Social Security Administration indicated that a one-time payment would be deposited into the account on file by the end of March 2025.
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The nonpartisan Committee on a Responsible Federal Budget estimates that the Social Security Administration would add $196 billion state budget deficit within 10 years of its enactment and is thought to accelerate the deficit of Social Security’s principal trust fund by six months.
