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By Aliss Higham
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A group of Democratic senators has introduced the Working Americans’ Tax Cut Act, a plan that would eliminate federal income tax liability for many of the country's lowest earners.
The Working Americans’ Tax Cut Act (WATCA) would wipe out federal income liability for many lower earners and cut bills for middle-income households by creating a new "maximum tax" tied to living costs, while adding a graduated surtax on millionaires.
Why It Matters
The bill comes at a time when high living costs are impacting budgets across the country. According to the bill sponsors, it would provide a permanent tax cut to "nearly 130 million working Americans."
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Sponsors of the bill say it would eliminate federal income taxes for many single filers earning less than $46,000 a year, with larger exemptions for heads of household and married couples filing jointly. They also say the plan is fully paid for through a surtax on income above $1 million.
What Is The Working Americans’ Tax Cut Act?
The proposal would create an alternative maximum tax for lower- and middle-income households, taxing income above a cost-of-living exemption set at $46,000 for single filers, $64,400 for heads of household and $92,000 for married couples filing jointly.
To offset the cost of the tax cut, the plan would add a surtax on higher earners: 5 percent on income above $1 million ($1.5 million for joint filers), 10 percent on income above $2 million ($3 million jointly), and 12 percent on income above $5 million ($7.5 million jointly). Both the exemption levels and surtax thresholds would be indexed to inflation.
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According to the bill’s sponsors, the tax cut phases down for taxpayers with income above 175 percent of the cost-of-living threshold. Within that range, most people would pay less tax than they do now: for example, someone earning $50,000 could see a tax cut of around $2,800.
The exemption is larger for heads of household and married couples filing jointly, and the tax benefit phases down at higher income levels rather than ending abruptly.
Sponsors say that within those ranges, many households would still owe less than they do under current law. For instance, a family of four earning $95,000 could see their taxes reduced by about $6,000.
The Tax Foundation estimates the proposal would lower federal tax revenue by $86 billion between 2026 and 2035. The “living wage” exemption alone would reduce taxes by nearly $1.6 trillion, while the surtax on millionaires would raise about $1.5 trillion, leaving the plan slightly short of being revenue neutral.
The bill has been introduced by Democratic Senators Chris Van Hollen of Maryland, Mark Kelly of Arizona, Kirsten Gillibrand of New York, Cory Booker of New Jersey, and Andy Kim of New Jersey, with Representative Don Beyer introducing companion legislation in the House. Additional Senate cosponsors include Dick Durbin, Bernie Sanders and several other Democrats and independents.
What People Are Saying
Democratic Senator Chris Van Hollen of Maryland said: "Far too many Americans are working hard for their paychecks but still having trouble making ends meet. 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."
Democratic Senator Kirsten Gillibrand of New York said: "Families are struggling amidst higher costs in Trump’s America. I’m proud to cosponsor the Working Americans’ Tax Cut Act to support working families, drive economic growth, and reduce income inequality. While the Trump administration turns its back on hardworking Americans, I will keep fighting to lower costs and make sure Americans can take home more of their hard-earned pay."
What Happens Next
The bill faces long odds in a Republican-controlled Congress: Republicans hold 53 seats in the Senate and 218 in the House, making it unlikely to advance without significant bipartisan support.
If enacted, it would apply to tax year 2026 and beyond.
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