Cost of Living Tax Cut Act

Key Points

• This bill would adjust federal income tax brackets based on where you live, so people in expensive areas are not pushed into higher tax rates just because local prices are high. The adjustments would apply starting with the 2027 tax year.
• The government would create a cost-of-living index for every metro area and rural region. People in areas where costs are more than 25% above the national average would get the biggest bracket expansion, effectively keeping more income in lower tax rates.
• People in areas with moderate costs (between 97% and 125% of the national average) would get a flat 5% expansion of their tax brackets. People in lower-cost areas would see no change at all, meaning no one's taxes would go up under this bill.
• The Department of Commerce would publish cost-of-living data for each statistical area every year, using the same methodology behind its existing Regional Price Parities indexes. The Treasury Secretary would then set the multipliers by December 15 each year.
• The bill was introduced by Rep. Gillen and Rep. Lawler, both from New York, and referred to the House Ways and Means Committee. It reflects a push by lawmakers from high-cost states to make the federal tax code account for regional price differences.