Troubling tax increases may be on the horizon as part of the reconciliation process to pass President Trump’s Big Beautiful Bill.
The centerpiece of this bill would be to make the 2017 tax cuts that individuals and small businesses currently enjoy permanent. This makes any talk of tax increases head-scratching.
Conservatives were handed the reins of government to cut costs, cut spending, and cut taxes. Let’s hope they don’t renege on any of those promises.
Last week, news agencies reported that the president was considering and had even asked the U.S. Speaker of the House, Mike Johnson, to consider tax increases on high-earning taxpayers.
The proposal, which the president rejected last month, would keep all rates low but allow the top individual income-tax rate to float back up to 39.6% from 37% for people making over $2.5 million.
On Truth Social, he expounded further, noting, “Republicans should probably not do it, but I’m OK if they do!!!”
The goal for the tax increase would be to help pay for middle- and working-class tax cuts without Medicaid reductions.
Allowing the tax cuts to rise on high earners is a leftist idea that conservatives should not embrace. Hiking taxes on the wealthy is a tax idea borrowed from Kamala Harris’s economic agenda and Bernie Sanders/AOC’s wishlist.
The Left falsely claims that tax cuts for the poor must be funded by tax increases on the rich.
First, this would hit small business owners, leading them to cut production and possibly cut jobs. In the 2017 tax cuts, conservatives lowered the top income rates and provided a 20% deduction for small businesses whose owners pay taxes through their individual returns (so-called pass-throughs).
This benefit was designed to create parity between corporations and people paying the 37% tax rate. A higher top rate would disrupt that balance.
Even worse, when combined with state taxes and the cap on deductions for state and local taxes, a 39.6% tax rate would mean that more people would face marginal combined tax rates above 50%.
On paper, these small business owners may seem like high earners, but this is business income. Higher taxes will force them to make cuts elsewhere in their businesses, and that could be devastating for their employees.
In addition, high earners already pay a significant portion of federal taxes. As I explained in this PragerU video, “Do Tax Cuts Work?“
“In 2021, the top 10% paid 76% of federal income taxes, and the top 1% paid 46% of taxes!” Hiking taxes for entrepreneurs and job creators discourages people from working harder and could push them to flee.
Raising taxes on high earners is the opposite of what’s needed right now.
Tax cuts round out the Trump economic agenda of deregulation, spending cuts, and tariffs. Raising taxes would undermine the cost-cutting and pro-growth elements of this agenda.