Trump wants to raise taxes on $2.5 million-plus earners.
Trump advocates for an increase in tax rates for individuals earning $2.5 million or more. President Donald Trump is advocating for lawmakers to raise tax rates on certain affluent Americans as a mechanism to balance other reductions in his hallmark economic initiative. The president’s proposal suggests the establishment of a new 39.6 percent tax bracket for individuals with earnings of at least $2.5 million, or for couples with a combined income of $5 million, as reported by sources knowledgeable about the discussions.
The president conveyed the request during a phone call on Wednesday with House Speaker Mike Johnson. He reiterated his intention to abolish the carried interest tax break utilized by venture capital and private equity fund managers, according to one source. Representative Jason Smith, who chairs the House tax committee, is anticipated to convene with Trump on Friday to convey that the tax bill will fulfill the president’s priorities, according to a congressional aide.
The proposal’s potential accompaniment by an expansion of the current exemption for certain small business income under the individual code remains uncertain. If Congress approves Trump’s plan for a 39.6 percent rate, the top bracket would reach a level not observed since prior to Trump’s 2017 tax cut. The prevailing maximum rate for individuals stands at 37 percent. Trump has conveyed ambiguous messages regarding the increase of taxes on affluent individuals. He has contemplated that such a levy might incentivize affluent Americans to move abroad and that it could negatively impact Republicans in elections.
However, the proposal emerges at a time when lawmakers face challenges in identifying funding sources for a multi-trillion-dollar package that Trump has referred to as the “one big beautiful bill” aimed at extending his initial tax cuts. Republicans face mounting pressure to constrain the total expenditure of the bill as they grapple with reaching consensus on reductions to entitlement programs, notably Medicaid, which provides health coverage for low-income Americans.
Raising taxes on high-income earners provides Republicans with greater flexibility to solidify the permanence of Trump’s 2017 tax cuts for households and to implement various campaign promises, such as the removal of taxes on tips and overtime compensation. A preliminary estimate from the non-partisan Tax Foundation indicates that instituting a new tax rate on millionaires could generate $67.3 billion over the course of ten years, as reported by Bloomberg News. The group has previously estimated that the removal of tax preferences for carried interest would generate $6.7 billion over a ten-year period.
Increasing taxes contradicts established Republican principles. Trump’s readiness to suggest a tax increase for millionaires illustrates the extent to which he has transformed the GOP in alignment with his populist vision. Commerce Secretary Howard Lutnick stated on Bloomberg Television that increasing taxes on the wealthy is a “smart” strategy to generate additional funds for Trump’s campaign proposals aimed at reducing taxes for hospitality workers and seniors.
Nevertheless, leading Republicans have expressed resistance to alternative proposals that would increase taxes on wealthy households. Representative Kevin Hern, a Republican from Oklahoma serving on the House tax committee, indicated that discussions are ongoing regarding the potential increase of the top tax rate and the elimination of carried interest; however, no consensus has been reached at this time. “Anytime the president requests something, we will evaluate it,” he stated.
Senator Mike Crapo, chair of the Senate Finance Committee, expressed his lack of enthusiasm regarding the tax increase proposal during a conversation with conservative radio host Hugh Hewitt on Thursday, noting that there exists a “number of people in both the House and the Senate who are” in favor of it. “If the president expresses support for it, then that will be a significant factor that we must consider,” Crapo stated.
