Congress proposes tax cap for workers, surcharge on millionaires

What it does

This bill creates two tax changes: (1) a cap on the tax rate for low- and middle-income individuals earning up to about $80,500 (single) at 25.5% of income above a cost-of-living exemption, and (2) a new surcharge on high earners—5% on income between $1–2 million, 10% on $2–5 million, and 12% on income above $5 million. Low- and middle-income workers get a tax ceiling; the wealthy pay additional tax on very high incomes.

Why we flagged it

The bill's core mechanism is a dual-track tax reform: a rate cap for lower earners and a new surcharge on high incomes. This is straightforward redistributive tax policy, not a hidden carve-out or rider.

What the text implies

• The 25.5% cap for low/middle-income individuals may interact unpredictably with existing credits and deductions, potentially creating unintended cliff effects or phase-out complications not visible in the text.
• The surcharge's treatment as 'not a tax imposed by this chapter' for credit purposes (Section 3(d)) may create loopholes allowing high earners to offset surcharge liability with certain credits, reducing effective progressivity.
• CPI-U indexing (September baseline) means the cost-of-living exemption and surcharge thresholds adjust annually; inflation will gradually expand the low/middle-income cap's reach, potentially increasing long-term revenue loss.
• The bill does not address interaction with Alternative Minimum Tax (AMT) or how the surcharge affects AMT calculations, creating potential double-taxation or avoidance scenarios for certain high-income profiles.

Who it affects

Ordinary workers and middle-income earners receive a tax-rate cap that may lower their effective tax burden, while high earners face a new surcharge. The net effect redistributes tax burden upward, benefiting the majority of working citizens at the expense of the highest-income households.

Who stands to gain

• low- and middle-income wage earners (primary)
• workers earning $46,000–$80,500 annually

Named in the bill

Internal Revenue Code of 1986, Bureau of Labor Statistics, Consumer Price Index for all urban consumers (CPI-U), Section 1A (new), Section 59B (new surcharge), Senate Committee on Finance

Where it stands

20 cosponsors: 18 Democrats, 2 Independents.

• Mar 12, 2026 — Introduced · Congress.gov: “Introduced in Senate”
• Mar 12, 2026 — Referred to Senate Committee on Finance · Congress.gov: “Read twice and referred to the Committee on Finance”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

2 lobbying clients named this bill on 2 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $490,000 in lobbying spend. A filing names 88 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 41% of bills with at least one filing.

Chris Van Hollen, the sponsor, reported $81,250 in PAC receipts in the 2026 cycle.

• American Federation of Teachers — $410,000 on 1 filing
• The Patriotic Millionaires LLC — $80,000 on 1 filing

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.