The Trump administration is considering an unexpected move in the GOP's 2025 tax legislation—raising taxes on Americans earning over $1 million per year. According to sources familiar with the matter, both Vice President JD Vance and Budget Director Russell Vought are open to the idea, even though it's facing significant resistance from key players in the Republican Party. Publicly, figures like former Chief Strategist Stephen K. Bannon are pushing President Trump to support this proposal, arguing that it could help the GOP counter accusations from Democrats about being the party of the wealthy.
However, the suggestion of increasing taxes on the rich is anything but a done deal. Prominent Trump allies such as Newt Gingrich, Steve Moore, and Larry Kudlow have strongly opposed it, claiming that such a move would contradict the president's promise to cut taxes and potentially harm the economy. On Capitol Hill, opposition is fierce, with GOP leaders like House Speaker Mike Johnson and Senators Ted Cruz and Dave McCormick making it clear that they are against any tax hikes.
In fact, Gingrich recently posted a message on social media, purportedly from Trump, acknowledging that while a "small increase" could have appeal, it would likely damage Republicans politically. He urged that if it's avoidable, the GOP should avoid raising taxes. The White House has not commented on the authenticity of the note.
While the idea of raising taxes on the wealthy has not found favor with many Republicans, Treasury Secretary Scott Bessent has expressed an openness to considering several tax options, including raising taxes on individuals earning over $5 million annually. This consideration reflects the ongoing struggle for the GOP, as they attempt to extend the 2017 tax cuts while grappling with the soaring national debt. Even though they’ve looked at major spending cuts—like reductions to Medicaid—Republicans are wary of alienating their base by imposing new taxes on the rich. This conundrum has led some Trump allies to explore ways of increasing taxes on the ultra-wealthy.
But even with some Trump insiders on board, such a proposal still faces an uphill battle. For decades, the GOP has firmly resisted tax hikes, and most political analysts believe that this idea will not make it through the legislative process. Doug Holtz-Eakin, president of the American Action Forum, argues that it has little chance of passing either the Senate or the House. "They’ll deflect and say they want to consider all possibilities, but it won’t have the votes," he said, dismissing the proposal as a non-starter.
Interestingly, Bannon has been advocating for higher taxes on the rich since Trump’s first term. He’s pitched a few ideas, including reverting the top tax rate to 39.6%, which would raise taxes for those earning more than $626,350 annually. He’s also suggested creating a new tax bracket for those making $1 million or more. Bannon argues that such moves would appeal to the working-class voters who have become a core constituency for the GOP, while also helping to deflect criticisms from Democrats who label the party as serving only the rich.
“This guts the AOC-Bernie ‘oligarchy tour,’” Bannon said, referencing the populist rallies held by Democratic figures like Alexandria Ocasio-Cortez and Bernie Sanders. For Bannon, the proposal is a political winner, saying it would “destroy the Democrats.” Yet, critics argue that raising income taxes on millionaires alone wouldn’t do much to address economic inequality. Wealthier individuals often benefit more from the growth in the value of their stock holdings than from income taxes, which makes it difficult for income-based tax hikes to make a significant dent in wealth disparities. Moreover, proposals to increase taxes on capital gains or unrealized wealth are not currently on the table for Republicans.
Data from the federal government supports this, with fewer than 150,000 taxpayers (less than 0.1% of all returns) earning more than $2.6 million in 2020. Steve Rosenthal, a former senior fellow at the Tax Policy Center, noted that wealthier individuals typically accumulate more of their wealth through capital gains, which often remain untaxed until sold, if at all. He suggests that without addressing this loophole, income tax hikes might not be as effective in redistributing wealth as some think.
In private conversations with Senate Majority Leader John Thune, Trump has expressed an interest in the idea of raising taxes on the wealthy but hasn’t made any commitments. The discussions highlight the broader dilemma facing the GOP as they prepare for the 2025 tax bill. Most of the tax cuts from the 2017 law are set to expire at the end of the year, so Republicans are looking for ways to extend them while also addressing the deficit. However, they’re aware that balancing tax cuts for the rich with necessary spending cuts will be politically tricky.
Kyle Pomerleau, a senior fellow at the American Enterprise Institute, explained that any increase in the top tax rate would raise about $400 billion over the next decade, which could help offset some of the costs of the GOP's tax cuts. However, traditional conservatives are deeply opposed to such moves. "They don’t like the politics. They don’t like the economics," he said, emphasizing the resistance within the party to any new taxes.
Another consideration is the potential pairing of a millionaire tax hike with changes to state and local tax deductions, a policy introduced in 2017 that limits how much Americans can deduct from their federal taxes for state and local taxes. While some have proposed increasing this cap, analysts like Erica York from the Tax Foundation believe that such a move would likely make wealthier individuals worse off and would probably be rejected by Congress.
Despite the ongoing discussions, Vance’s openness to higher taxes has stirred concern among some conservatives, especially those looking ahead to the 2028 GOP presidential race. Vance, who has spoken out against further corporate tax cuts, has also shown interest in bipartisan efforts to close tax loopholes for large corporations. This puts him at odds with more traditional conservatives, who fear that increasing taxes—especially on high earners—could alienate their voter base.
Moore, a former Trump advisor, warned that embracing higher taxes could have disastrous political consequences for the GOP, recalling former President George H.W. Bush’s decision to raise taxes, which many conservatives still view as a political blunder. "It sounds like Bernie Sanders economics," Moore said, highlighting the concerns that such a policy could turn off the GOP's conservative base and alienate them from the broader electorate.
In conclusion, while some within the Trump administration are pushing for tax increases on the wealthiest Americans, the proposal remains deeply divisive. With midterm elections approaching and pressure to extend tax cuts set to expire, the GOP finds itself at a crossroads—caught between traditional conservative principles and the evolving political dynamics within the party. Whether or not higher taxes on the rich will become part of the 2025 tax plan remains uncertain, but one thing is clear: it’s a complicated issue that will continue to spark fierce debate within the GOP for months to come.
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