White House aides are quietly exploring a proposal with select House Republicans that would raise the top income tax rate to 40% for individuals earning over $1 million annually. The potential tax increase is being discussed as a way to fund new tax breaks aimed at eliminating taxes on overtime pay, tipped wages, and Social Security income for retirees, according to sources familiar with the early-stage conversations.
These discussions are still in the preliminary phase and are one of several options under consideration as lawmakers work to advance President Donald Trump’s economic agenda through the budget reconciliation process. This approach allows the majority party to pass budget-related legislation with a simple majority in the Senate, bypassing the need for bipartisan support.
Though Trump himself has not taken an official stance on the proposed rate hike, it is being analyzed by his policy team and Republican staffers on Capitol Hill. Some Republicans are pushing back, citing concerns over straying from the party’s traditional stance on across-the-board tax cuts. One GOP lawmaker, who requested anonymity, said they were open to the concept but preferred to see the higher rate apply to incomes above $2 million instead of $1 million.
Feedback within Republican ranks has been mixed. Not all GOP members are aware of the proposal, and it’s unclear how widely the idea has circulated within the party. Still, the debate underscores internal divisions about how best to fund new tax relief measures while upholding fiscal responsibility.
Renewing and expanding the tax policies introduced during Trump’s first term specifically the 2017 Tax Cuts and Jobs Act is a central goal for Republicans in the upcoming budget negotiations. However, extending those cuts is projected to cost trillions over the next decade. While budget tactics like using the current policy baseline could help soften the apparent cost, lawmakers still need to find credible offsets for additional proposals like exempting tipped wages and overtime from taxation.
Raising taxes on high earners could offer Republicans a way to finance these benefits without adding to the deficit while also putting political pressure on Democrats, many of whom have long supported taxing the ultra-wealthy.
Currently, the top marginal tax rate is about 37% for individuals earning over $609,000 or couples earning above $731,000. Returning to a pre-2017 rate closer to 39.6% or going even higher for millionaires has been floated by some GOP members as a trade-off to make Trump’s new tax vision more fiscally viable.
One Republican budget hawk suggested restoring the higher bracket if sufficient spending cuts can’t be identified elsewhere. “We need to be honest about how we’re paying for this,” he said, noting that if spending offsets fall short, tax adjustments may be necessary.
Still, not all Republicans are on board. The House Majority Leader dismissed the millionaire tax idea outright but acknowledged that a variety of strategies are being discussed. “Everything’s on the table,” he said, warning that failure to act could result in tax hikes for the vast majority of Americans when provisions from the 2017 law expire.
The proposal reflects the balancing act facing the GOP: maintaining a commitment to tax relief while contending with the fiscal realities of expanding it further.
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