RETIREES FIRST Act Raises Social Security Tax Thresholds to $68K, Funds Relief with Cuts to Non-Security Programs

The Reducing Excessive Taxation and Inefficiencies by Reforming Elder Exemptions to Support Fairness, Inflation Relief, and Simpler Taxes Act—or the RETIREES FIRST Act—is a bill focused on changing how the federal government taxes Social Security benefits, starting with the 2026 tax year. The core of this legislation significantly raises the income thresholds that trigger federal taxation of your Social Security checks, and it ties those new levels to inflation forever.

The New Tax Thresholds: What’s Covered Now

Right now, if your combined income (adjusted gross income plus non-taxable interest plus half of your Social Security benefits) crosses a certain line, up to 85% of your Social Security benefits can become taxable. This bill keeps the 85% maximum but moves the goalposts way out. For single filers, the income threshold jumps to $34,000. For married couples filing jointly, that threshold skyrockets to $68,000. This means a lot more retirees will see their Social Security benefits completely excluded from federal income tax, giving them a bigger break. Crucially, these new dollar amounts will be indexed to inflation annually starting after 2025, which means they won't lose their value over time—a big win for long-term planning.

For example, consider a retired couple living on $40,000 a year in Social Security benefits and $25,000 a year from a pension. Under the new $68,000 threshold, they would likely pay significantly less—or possibly zero—federal tax on their Social Security income compared to current law. This is direct, tangible relief for people living on fixed incomes, addressing a major pain point as costs rise.

The Funding Mechanism: Who Pays the Bill?

Here’s where things get complicated. The bill doesn't just cut taxes; it explicitly dictates how that tax relief will be paid for. Because taxing Social Security generates revenue that goes back into the Social Security and Railroad Retirement trust funds, reducing that tax revenue would normally hurt those funds. Section 2(c) of the bill ensures that the trust funds are protected: Congress will appropriate whatever money is needed to make up for any lost revenue, keeping the trust funds whole.

But that money has to come from somewhere else in the federal budget. Section 3 mandates that starting in Fiscal Year 2027, an amount equal to the cost of this tax relief must be rescinded (cut) from non-security discretionary federal spending. This cut is applied pro-rata, meaning it takes a little bit from every program funded through regular, non-security spending bills. Think of it like an automatic, across-the-board budget haircut for everything that isn't considered “security” spending.

Real-World Tradeoffs: The Cost of Relief

This funding mechanism sets up a clear tradeoff. While retirees get significant tax relief, the cost is borne entirely by other domestic programs. The bill explicitly protects “security category” spending, but everything else is on the chopping block to pay the difference. For busy people juggling work and family, this could mean cuts to programs that affect them directly, such as job training initiatives, funding for local infrastructure projects, environmental protection programs, or non-defense scientific research.

If the tax relief costs the government $10 billion in a given year, that $10 billion must be automatically clawed back from non-security discretionary programs, potentially impacting services that help working families, students, or small businesses. The Director of the Office of Management and Budget (OMB) is required to report annually on exactly which programs faced these mandated cuts. This bill is a classic example of policy using a specific funding mechanism to shift costs: it offers inflation-proof tax relief to one group while automatically imposing a proportional budget squeeze on a broad range of other government services.