President Donald Trump expressed openness to a new tax on millionaires to offset the cost of his legislative agenda, according to two sources familiar with the matter.
In a meeting last week with Senate Budget Committee Republicans, Trump was receptive to allowing the top marginal tax rate to revert back to 39.6%, where it was before he signed his 2017 tax cuts into law. The suggestion was raised by Sen. Lindsey Graham (R-SC), according to Semafor, as Republicans game out how to pay for a bevy of working-class tax cuts Trump promised on the campaign trail.
Trump did not demand the tax hike, one source familiar with the meeting told the Washington Examiner, but his receptiveness follows reports that White House advisers are open to a modest hike on the wealthiest earners.
The White House did not respond to a request for comment.
Senate Majority Leader John Thune (R-SD), who attended the White House meeting, acknowledged that his conference has been discussing the tax hike, but he suggested that conversations were preliminary and that there were “a lot of proposals flying around the tax space.”
“I don’t know where that’ll land, but it’s something we would have to work closely with the House and with the White House on,” he said.
On Tuesday morning, Speaker Mike Johnson (R-LA) declined to put his “thumb on the scale” when asked about the proposal but said that “generally, we’re trying to reduce taxes around here.”
The idea of raising taxes runs counter to decades of GOP orthodoxy. Republican presidents from Ronald Reagan to George W. Bush lowered the top rate during their terms in office, as did Trump in 2017. The rate dropped from 39.7% to 37% for individuals making roughly $600,000 a year under Trump, meaning congressional Republicans could simply allow it to snap back when tax cuts expire at the end of the year.
Another option under discussion would be creating a new bracket for taxpayers making $1 million or more at the 39% rate.
Senior Republicans, including House Majority Leader Steve Scalise (R-LA), flatly rejected the idea of raising the top marginal tax rate, but the proposal is appealing to some who feel the party is losing the messaging war on Trump’s agenda.
Republicans have faced a barrage of Democratic accusations that their tax plan will cut welfare programs like Medicaid to help the wealthiest taxpayers.
“They’re reacting to the demagoguery that we’re trying to cut taxes for the wealthy, which we’re not,” said Sen. Ron Johnson (R-WI), one opponent of the tax hike. “We’re just trying to prevent a massive, automatic tax increase on every American.”
Other Republicans see the proposal as a way to pay for a spate of tax exemptions that Trump promised on the campaign trail, including carveouts for overtime and tip wages. Tax writers are pursuing a novel accounting method that treats trillions in new tax cuts as cost-free, but revenue-generators like the marginal tax hike could be one way to calm the nerves of budget hawks.
Rep. Andy Harris (R-MD), the chairman of the House Freedom Caucus, is among those open to the idea, while populist Republicans like Sen. Josh Hawley (R-MO) are receptive.
“If that’s something he wants to do in order to offset tax cuts for working people, that’d be fine by me,” Hawley said.
Most tax writers reserved judgment on the proposal in interviews with the Washington Examiner. They are faced with the daunting task of trying to balance Trump’s tax proposals with a deficit-increasing hike in the state and local tax deduction, a demand of blue-state Republicans.
“We haven’t seen all the math on that to be able to know” its impact, said Sen. James Lankford (R-OK), a member of the Senate Finance Committee.
Others expressed concern that small businesses filing as individuals could wind up penalized with a higher marginal rate.
“I think we have to be very careful that we don’t inadvertently raise taxes on small businesses and hurt their ability to do business, much less invest and hire more people,” said Sen. John Cornyn (R-TX).
Still, a surprisingly wide cross-section of congressional Republicans are open to the proposal. Sen. Kevin Cramer (R-ND) speculated that the hike, on a marginal basis, is small enough that “I doubt anybody would even notice.”
“It’s been talked about. People have said they’re open to it. I’d be one of those that would be open to it,” Cramer said.
Cornyn said the idea was “constant and universal” when asked whether it’s the White House or Republicans on Capitol Hill driving the discussion.
The ranks of traditional fiscal conservatives, among them Ron Johnson and Sen. Mike Lee (R-UT), are flatly opposed to the proposal.
“I’m not excited about that,” said Lee. “I don’t think it’s a good idea.”
Democrats, meanwhile, have begun to pour cold water on the idea that Republicans would include a tax hike on millionaires in their final bill.
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“They’re not going to f***ing do that,” said Sen. Brian Schatz (D-HI), a member of Senate Democratic leadership. When pressed for more explanation, he called it “self-evident.”
Other senior Democrats, many of whom were unaware of the proposal, declined to comment.
Rachel Schilke contributed to this report.