Working Americans’ Tax Cut Act

Key Points

• This bill creates a new alternative maximum tax for low and middle income individuals. It caps the tax rate at 25.5% on income above a cost-of-living exemption, shielding the money people need for basic expenses like food and housing from heavy taxation.
• To qualify, a single filer's income must be less than 175% of the cost-of-living exemption (roughly $80,500 based on the $46,000 base). Joint filers get double that threshold. Head of household filers get 140% of the base amount.
• The cost-of-living exemption starts at $46,000 for single filers, $92,000 for joint filers, and $64,400 for heads of household. These amounts are indexed to inflation using the Consumer Price Index so they rise with the cost of living each year.
• To offset the cost, the bill imposes a new surcharge on very high earners: 5% on income between $1 million and $2 million, 10% on income between $2 million and $5 million, and 12% on income over $5 million. These thresholds are also inflation-adjusted.
• Both provisions would take effect for tax years beginning after December 31, 2025, meaning workers and high earners would first see the changes on their 2026 tax returns filed in early 2027.