President Trump asked House Speaker Mike Johnson to include tax hikes for rich Americans in lawmakers in the vast fiscal package.
Trump said he would like to create a new top income bracket for people making more than $2.5 million a year, and would like to tax revenues above that level at a 39.6% tax rate. One of the people said the president raised the idea to Johnson in a call Wednesday.
Such changes roll back one of the tax cuts Trump signed into law in 2017 as a tax cut and employment law. This measure reduced the percentage of revenue earned on top brackets from 39.6% to 37%. This year, top income brackets start at $626,350 for individuals. Trump is effectively sought to recover his previous top rate, but at much higher income levels.
Trump is wary of Republicans who flirt with some sort of tax rise for the rich for weeks and like to cut taxes as a common issue. Conservatives have been actively lobbying the idea, and last month Trump declared that the so-called billionaire tax was “very destructive.”
But Republicans are also facing tricky political and budget calculations. Under fiscal law, they struggle to complete. To offset the enormous costs of tax cuts they want to include – many of which are continuing the cuts in 2017 – Republicans are preparing to cut spending on Medicaid, a healthcare program for the poor.
The optics of reductions to cover the costs of tax cuts that bring the richest benefits are worried about Republicans in the hopes of cultivating working class support. Those familiar with Trump's ideas said the president believes tax increases on the rich will help protect Medicaid.
Republicans are considering other tax-deductible increases with populist flavor, including raising taxes on stock buybacks and further limiting the company's ability to deduct compensation for highly paid employees. Trump also wants to end tax credits that allow private equity and hedge fund managers to pay lower fees for most of their revenues.
Trump's revival over the possibility of raising income taxes on the rich is the same as House Republicans want to release the first draft of their tax bill. They are already trying to find ways to resolve other unresolved issues, such as state and local tax credits that some Republicans are demanding to expand, such as Medicaid cuts.
Sen. Michael Krapo, a Republican from Idaho, heads the finance committee and was wary of the idea of raising taxes on the rich.
“Now, I'm not excited about the proposal,” he said in an interview with conservative commentator Hew Hewitt. “But I have to say, there are a lot of people in both the home and in the Senate, and if the president supports it, that's going to be a big factor that we have to consider as well.”
