"WASHINGTON -- Fifteen days after taking a marginal tax-rate increase off the table, President Trump put it back in play.
The president, who rejected a "millionaires tax" April 23, is now considering backing a tax structure that would return the top individual income-tax rate to 39.6% from 37% for people making over $2.5 million, according to people familiar with White House discussions.
The move could create breathing room as Republicans struggle to squeeze Trump's tax cuts into a fiscal bill they are trying to unveil in the next few days and push through the House this month. The higher the top tax rate goes, the easier it could be for Republicans to avoid deep Medicaid cuts and reduce other taxes.
It could also help counter Democrats' charges that the GOP wants to cut the social safety net to pay for tax reductions for the rich.
But many GOP lawmakers oppose a higher top tax rate, and Trump would need almost every one of them to endorse it in the narrowly divided House and Senate. The top tax rate is the untouchable hot stove in the Republican Party, which has partly defined itself in opposition to any rate increases for more than three decades.
Republican leaders are already having trouble corralling all the votes they need. Four New York Republicans -- Elise Stefanik, Mike Lawler, Nick LaLota and Andrew Garbarino -- rejected what they described as a proposal from Speaker Mike Johnson (R., La.) and the House Ways and Means Committee to raise the cap on the state and local tax deduction to $30,000 from $10,000. They said the offer was insultingly low and risked derailing Trump's tax-and-spending bill.
"A higher SALT cap isn't a luxury," they said. "It's a matter of fairness."
Trump's flirtation with higher rates for top earners is a sign of the populist bent that the president has brought to the GOP. The president's influence in the party is strong enough that he can move Republicans toward policies they might otherwise oppose. This one, if he pursues it, would test the limits of that appeal.
"Right now, I'm not excited about the proposal," Senate Finance Committee Chairman Mike Crapo (R., Idaho) said on "The Hugh Hewitt Show." "If the president weighs in in favor of it, then that's going to be a big factor that we have to take into consideration."
The top tax rate was 39.6% before Trump took office the first time in 2017. That year's Republican tax cuts lowered the rate to 37% but scheduled that reduction and other changes to expire after 2025. That deadline created the urgency for Republicans to act now.
House Republicans have kept the details of their tax plan closely guarded, but they have been focused on making Trump's 2017 tax cuts permanent and given little indication that they support a higher top rate.
This year, the 37% top tax rate applies to taxable income of individuals above $626,350 and to married couples above $751,600.
The higher rate would raise about $59.3 billion over a decade, according to the Tax Foundation. That assumes a $5 million level for married couples, inflation indexing and extensions of all other provisions. It would affect 150,000 to 200,000 households.
Republicans have been planning to extend the current tax structure and not create an additional bracket at the top.
Trump was earlier considering such a tax-rate increase, nudged by outside advisers such as Steve Bannon and opposed by others such as former House Speaker Newt Gingrich. Last month, the president said he liked the idea of raising taxes on the rich but rejected it, saying the proposal would be disruptive and that Democrats would attack Republicans politically over it.
Trump also said that wealthy people would leave the U.S. if taxes went up, though citizens typically can't do that and avoid U.S. taxes unless they renounce their citizenship and pay taxes on their assets as if they sold them.
The tax-cut wing of the GOP sprang into action on Wednesday, warning lawmakers about the political and economic consequences of raising taxes. Grover Norquist, the antitax activist and president of Americans for Tax Reform, noted in a post on X that Trump ran on making all his tax cuts permanent.
"This is not a serious option, and it is political suicide," said David McIntosh, president of the Club for Growth. "We think this is bad policy and bad politics. If Republicans increase taxes, they almost certainly will lose the House and Democrats will start the impeachment process all over again."
A tax-rate increase at the top would interact with other tax provisions. For example, Republicans created a 20% deduction for closely held businesses whose owners pay taxes through their individual returns. They designed that to create rough parity between corporations and people paying the 37% tax rate, but a higher top rate would disrupt that balance.
And, when combined with state taxes and the cap on deductions for state and local taxes, a 39.6% tax rate would mean that more people would face marginal combined tax rates above 50%." [1]
1. U.S. News: Trump Revives 'Millionaires Tax' Idea. Rubin, Richard; Leary, Alex; Beavers, Olivia. Wall Street Journal, Eastern edition; New York, N.Y.. 09 May 2025: A4.
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