Republicans are weighing the creation of a new bracket for those earning $1 million or more to offset some of the costs of their tax bill, a stark departure from decades of GOP opposition to tax increases, according to people familiar with the matter.
Deliberations have included a new top rate that would be around 39% to 40%, according to people familiar with the matter, who have requested anonymity to discuss a matter that is still being negotiated.
The tax plans are fluid and are still subject to change, the people cautioned. Officials in President Donald Trump’s administration and allies on Capitol Hill are beginning to draft a tax package, with the hopes of passing it within the coming months.
Also under consideration is raising the top tax rate, currently set at 37% for incomes greater than $626,350, to 39.6%. That idea, first reported by Axios, means the top rate would revert back to what former President Barack Obama signed into law.
Representatives for the White House and the Treasury Department did not immediately respond to requests for comment.
The possibility of higher taxes — even on the wealthiest Americans — is likely to spark controversy within the Republican party, which has undergone a shift from essentially requiring no-new-tax pledges from their members to embracing more populist ideas under Trump.
Trump’s first-term cuts, dubbed the Tax Cuts and Jobs Act, faced a backlash for skewing many of the benefits to large corporations and high-earning Americans. This time, administration officials don’t want the tax bill to be perceived as a giveaway to the rich, the people said.
Treasury officials are also urging their allies at the White House and on Capitol Hill to move quickly on a tax package in order to counteract the market turmoil and economic uncertainty spurred by Trump’s wide-ranging tariff policies unveiled on Wednesday, they said.
Republicans are aiming to pass a tax bill in the coming months that would renew the 2017 cuts, increase the federal government’s borrowing limit and include a fresh round of levy reductions.
The Senate is set to vote on a budget resolution in the coming days that will pave the way for the passage of the tax bill. That measure calls for a $4 trillion extension of Trump’s cuts and an additional $1.5 trillion for more reductions.
On the campaign trail, Trump unveiled a series of populist ideas — including eliminating taxes on tipped wages, overtime pay and Social Security benefits. He’s also called for making car-loan interest deductible and raising the $10,000 cap on state and local tax write-offs, provisions that appealed to voters in battleground Michigan and competitive House districts near New York City.
The ideas for higher top rates are surfacing as Republicans are facing tough choices about whether to offset the cost of their multi-trillion dollar tax package. By increasing taxes on high-earning Americans, they would have more revenue to offset the costs of some of Trump’s campaign trail proposals.
The White House has also said it is aiming to eliminate the carried-interest tax break used by private equity and hedge-fund managers to lower their tax bills.
The total cost of the package will be central to the fight as Republicans look to renew Trump’s first-term tax cut package, much of which expires at the end of the year, plus fresh round of deductions and credits.
To contact the reporters on this story:
Nancy Cook in Washington at ncook40@bloomberg.net;
Saleha Mohsin in Washington at smohsin2@bloomberg.net
To contact the editors responsible for this story:
Laura Davison at ldavison4@bloomberg.net
Wendy Benjaminson |
