S.4042 - Keep Your Pay Act
S.4042 - Keep Your Pay Act
Senator Cory Booker (D-NJ) introduced the Keep Your Pay Act, a proposal that would cut taxes for working Americans and raise taxes on businesses and the wealthy. It proposes significant tax changes for 2026–2035, including a temporary increase in the standard deduction (up to for married couples). It aims to support families with a monthly child tax credit, expand the earned income credit, and increase the top tax rate for high earners.
“[Americans] are working harder than ever, but they’re struggling to get by because they’re facing out of control costs and an economy that is stacked against them—so we need big ideas to start making the American Dream possible for everyone again,” said Senator Cory Booker. "No income tax on the first $75,000 families earn would be a game changer for working people. This tax cut would immediately put more money in your pocket every month to deal with the high price of everyday expenses, an unexpected emergency, or to plan for the future. This plan can be fully paid for by unrigging our tax system – so that the wealthiest few and the biggest corporations that are getting rich by keeping prices high finally start paying their fair share. This idea will ensure Americans who work for a living keep more of their paychecks, help restore tax fairness, and start making America a country where working people can get ahead again.” The Senator claims that under the proposal, the median American family would see their taxes cut by roughly 85 percent.
- Increase the standard deduction: The proposal would more than double the standard deduction, from $16,100 to $37,500 for single filers and from $32,200 to $75,000 for married couples filing jointly, effective 2026 through 2035.
- Expand the Earned Income Tax Credit (EITC): The proposal would more than double the maximum EITC for workers without qualifying children, from about $660 to $1,500, by doubling the phase-in and phase-out rates and raising the earned income threshold for the maximum credit. Eligibility would expand to workers ages 19 and older, removing the current floor of 25 and ceiling of 64. The proposal would also allow all taxpayers to elect prior-year earnings when calculating their EITC.
- Expand the Child Tax Credit (CTC): The proposal would permanently increase the maximum credit to $4,320 per year ($360 per month) for children under 6 and $3,600 per year ($300 per month) for children ages 6 through 17, up from the current-law value of $2,200. It would make the credit fully available to workers without earnings, introduce an additional $2,040 “baby bonus” in the year of a child's birth, and add a two-tier phaseout structure beginning at $120,000 for unmarried filers and $160,000 for joint filers.
- Raise the top two income tax rates: The proposal would increase the second-highest bracket rate from 35 percent to 41 percent and the top marginal rate from 37 percent to 43 percent, effective 2026 through 2035. These increases would apply to taxable income above approximately $256,000 and $640,000 for single filers and $512,000 and $768,000 for joint returns.
On net, the proposal would cost $5.4 trillion over the ten-year budget window, or roughly 1.4 percent of GDP. Because the standard deduction and top tax-rate increases would sunset after ten years, the revenue costs in the second and third decades would be smaller, reflecting only the impact of the CTC and EITC provisions.
Opponents argue it would create a large new tax expenditure while relying on highly uncertain offsets, especially from higher corporate and top-end tax rates that may not raise enough revenue in practice. Critics can also argue that making the first $75,000 of income tax-free would sharply reduce the tax base, add complexity through multiple expanded credits, and risk unintended side effects such as weaker incentives for additional work or hiring at the margins. A more limited, targeted approach to tax relief could be easier to finance, less distortionary, and more durable than a sweeping redesign of the individual income tax system. The projected federal budget cost of the Keep Your Pay Act has been estimated at up to $6.4 trillion over 10 years, representing a significant revenue loss.
Should Congress pass S.4042, the Keep Your Pay Act?
