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Donald Trump has proposed raising taxes on the wealthiest Americans, in a breach of Republican orthodoxy that he hopes could pay for broader tax breaks being debated in Congress.
The US president proposed an increase in the tax on people earning more than $2.5mn a year to almost 40 per cent, as he began talks with congressional Republicans on the details of a new fiscal package he hopes to pass this year.
“The president is considering allowing the rate on individuals making $2.5mn or more to revert from 37 per cent to the pre-2017 39.6 per cent. This will help pay for massive middle- and working-class tax cuts, and protect Medicaid,” a person familiar with Trump’s thinking said on Thursday, referring to the government healthcare plan for low-income households.
Trump’s proposal would mark a major break from the traditional Republican low-tax approach to high earners — and drew criticism from some rightwing groups who said it was more akin to a Democratic policy.
It comes as the White House and Republicans on Capitol Hill try to accelerate the fiscal package, which would extend Trump’s sweeping 2017 tax cuts, which are set to expire next year.
The tax bill is Trump’s highest legislative priority on the economy but has been overshadowed early in his second term by the global trade war he launched on April 2, which included an array of high tariffs imposed on US trading partners.
The negotiations among Republican lawmakers have also revealed disagreements over how to pay for the tax cuts and other measures in the package.
As well as considering higher taxes for the wealthiest households, Trump has also signalled his willingness to end the preferential tax treatment of hedge fund and private equity profits known as “carried interest”, in a potential blow to Wall Street.
Alongside the taxes on financiers and wealthy Americans, however, lawmakers are also considering raising the “Salt cap”, a move that would allow property owners to deduct as much as $30,000 dollars in state and local levies from their tax bill.
The current limit of $10,000 was set in Trump’s 2017 tax package. The new limit would amount to a significant tax break in many prosperous US neighbourhoods.
“It’s still an ongoing discussion amongst the members, and I think we’ll find the right point,” Mike Johnson, the Republican House Speaker, told reporters.
Trump’s consideration of an increase in taxes for the wealthiest Americans drew a swift backlash from conservative anti-tax groups.
“Raising the top tax rate to 39.6 per cent is a Kamala Harris proposal. She lost the election to President Trump. No need to adopt her tax hike,” said Americans for Tax Reform, which opposes all tax increases.