President Trump swatted down the idea of a new tax for wealthier Americans yesterday, killing rumors that the administration might embrace Bernie Sanders-style tax policy to pay for conservative tax relief.

When asked by a reporter about rumors of a millionaire tax by conservatives yesterday, President Trump answered:

I think it would be very disruptive because a lot of the millionaires would leave the country.

 

You know, in the old days, they left states. They’d go from one state to the other. Now, with transportation so quick and so easy, they leave countries.

 

You lose a lot of money if you do that. And other countries that have done it have lost a lot of people. They lose their wealthy people. That would be bad because the wealthy people pay the tax.

This is a very good signal that the president is sending both to lawmakers as they are drafting the Big, Beautiful Bill to extend the 2017 tax cuts and to the public.

Earlier this year, rumors began swirling around Washington, D.C., that the president was open to tax increases on higher earners. Opponents of this idea had been working to educate the administration on the folly of this approach.

However, a Washington Post article yesterday mapped out the different factions of the president’s inner circle (both within and outside of the White House) and the clash of views from those influencing President Trump on taxes. 

With yesterday’s statement, it appears his better angels have won. 

As we’ve come to understand, President Trump likes to assemble people with differing viewpoints who battle over issues, offering him different perspectives. He makes the final decision for the administration.

A Clash of Titans

On an issue as consequential as tax policy, there appears to be a clash of titans.

According to the Washington Post reporting, those in support of the idea:

Vice President JD Vance and budget director Russell Vought have expressed openness to the idea in internal administration deliberations and are viewed as supportive…. Stephen K. Bannon, who served as the president’s chief strategist during his first term, has been publicly urging Trump to endorse the plan in part as a way to defang Democratic attacks on the GOP as the party of the rich.

 

Bannon has pitched various ideas for how Republicans can recoup some revenue by raising taxes on the rich…

 

‘This guts the AOC-Bernie ‘oligarchy tour,’’ Bannon said, referring to the populist rallies being held by Rep. Alexandria Ocasio-Cortez (D-New York) and Sen. Bernie Sanders (I-Vermont). Bannon has been trying to convince Republicans to embrace higher taxes on the rich since Trump’s first term. ‘Politically, it’s game, set, match — it’s a no-brainer. This would destroy the Democrats.’

Those strenuously opposing it:

Outside Trump advisers Newt Gingrich, Steve Moore and Larry Kudlow have come out strongly against it, arguing the plan undermines the president’s promise to cut taxes and will discourage economic growth, as has the influential Fox News host Sean Hannity. House Speaker Mike Johnson (R-Louisiana) and GOP Sens. Dave McCormick (Pennsylvania) and Ted Cruz (Texas), among other congressional Republicans, have also made clear that they dislike the idea of raising taxes and do not expect it to become incorporated into new legislation.

Those on the fence:

Treasury Secretary Scott Bessent has expressed openness to a range of ideas, including the possibility of raising taxes on Americans earning more than $5 million per year, two of the people said.

Why Conservatives Oppose Millionaire Taxes

Raising new taxes on the wealthy—whether through new millionaire taxes, allowing the tax rates for the top tax bracket to rise back up to 39.6% from 37%, or something else—is ill-advised.

New taxes on the wealthy go against a tenet of proven fiscal conservative policy. The Left loves the idea of soaking the rich to advance expansions of government. However, there are good reasons this won’t work:

  • Taxing the rich does not solve the gluttonous spending problems; it only encourages more of it.
  • Taxes become a penalty against success and weaken incentives to work. 
  • Taxes harm “pass-through entities”—small businesses that pay income taxes through the personal tax returns of the owners—by reducing their investments.
  • The wealth of many high earners is not through paychecks but assets, so new income taxes won’t generate significant sums. (Side note: That should not be an invitation to adopt Kamala Harris’s disastrous idea to tax unrealized capital gains.)
  • Wealthy Americans are mobile and can choose to move overseas to shield their wealth.

The last argument seemed the most salient to President Trump, who pointed to it as the reason not to adopt the policy.

Conservatives have learned that reducing taxes, not raising them, is good for the economy and government coffers. When they break the pledge to lower taxes—even on high earners—they pay a penalty in the economy and at the ballot box.

The Wall Street Journal explained:

Getting income-tax rates down was a signal achievement for Presidents Ronald Reagan and George W. Bush. Tax increases signed by President George H.W. Bush in 1990 broke his “read my lips” pledge and fractured the party, and the tax-cut wing has dominated since then.

And on the political gain that Steve Bannon believes can be attained for Republicans by splitting the Bernie/AOC vote through taxing the rich, former Speaker Newt Gingrich batted that down: 

On Tuesday, in the message posted by Gingrich, Trump said Democrats would use any tax increase against Republicans at the ballot box…

 

‘It’s a dead end,’ Gingrich said. ‘Interesting theory, terrible reality.’

 

Gingrich, who led the intraparty fight against George H.W. Bush’s tax hikes, said Trump might be powerful enough among Republicans to muscle through a rate increase on the wealthy. ‘But what would the gain be?’ he said. ‘Nobody on the left will give him any credit for it and it will split his own base. And I think he’s smart enough to understand.’

Bottom Line

Americans need tax relief, but it cannot be borne on the backs of job creators, small business owners, or high-income earners. President Trump reaffirmed this commitment.