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The White House Watch newsletter provides insights into the implications of a potential second term for Donald Trump, focusing on its effects in Washington, business, and globally.
Donald Trump has proposed increasing taxes on the wealthiest Americans, diverging from traditional Republican principles. This proposal aims to fund broader tax cuts currently being discussed in Congress. The U.S. President has suggested elevating the tax rate for individuals earning over $2.5 million annually to nearly 40 percent as part of discussions with congressional Republicans on a new fiscal package he hopes to pass within the year.
A source familiar with Trump’s perspective stated that the President is considering allowing tax rates for individuals making $2.5 million or more to return from 37 percent to the pre-2017 rate of 39.6 percent. This change is intended to support substantial tax cuts for the middle and working classes and to protect Medicaid, a healthcare program for low-income households.
Trump’s proposal represents a significant shift from the Republican stance on low taxes for high earners and has faced criticism from certain rightwing groups, which argue that it resembles a Democratic policy. This proposal surfaces as the White House and Republicans on Capitol Hill aim to expedite the legislative package designed to extend Trump’s extensive 2017 tax cuts set to expire the following year.
The tax bill is Trump’s top economic legislative priority but has been overshadowed by the global trade war initiated on April 2, involving high tariffs on U.S. trading partners. The negotiations among Republican lawmakers have exposed disagreements over funding for the tax cuts and other measures within the legislative package.
In addition to potentially increasing taxes for the wealthiest households, Trump has indicated a willingness to end the favorable tax treatment of hedge fund and private equity profits, known as "carried interest," potentially impacting Wall Street. Concurrently, lawmakers are contemplating raising the "Salt cap," which would allow property owners to deduct up to $30,000 in state and local taxes from their tax returns. The current limit of $10,000 was established in Trump’s 2017 tax package, with the new cap providing a notable tax relief in many affluent U.S. neighborhoods.
Mike Johnson, the Republican House Speaker, commented that discussions among members are ongoing and expressed optimism about finding an appropriate resolution.
Trump’s consideration of a tax increase for the wealthiest Americans has drawn immediate criticism from conservative anti-tax groups. Americans for Tax Reform expressed opposition, associating the proposal with a similar one previously made by Kamala Harris, who lost the election to Trump.
