President Donald Trump's administration is considering allowing tax cuts to expire for high-income earners to overcome possible shortfalls without cuts, Axios reported. The outlet claimed an unnamed senior White House official said that Trump would be forced to do so as a concession to Democrats in exchange for the tax cut extensions.
Axios called this an amazing "scoop" but did not name inside sources who allegedly dished this information. However, the report made it clear that the sources also claimed this was still in the works and not "set in stone."
The top tax rate for individuals earning more than $609,351 and married couples earning $731,201 is 35% with Trump's tax cuts still in effect. With this concession, the top tax rate will go back to 39.6% with a lower income threshold, just as it was before 2018.
This would defang Democrats' main arguments, including slamming Trump for looking to cut Medicaid while cutting taxes for the rich. "If we renew tax cuts for the rich paid for by throwing people off Medicaid, we're gonna get f--king slaughtered," the White House official reportedly claimed.
Democrats have used class warfare as a major party platform point for decades. Part of their appeal has always been to make the rich pay their "fair share" to redistribute wealth to lower earners, which is exactly what the punishingly high top tax rate has done.
Republicans have historically opposed such a strategy and have run and won on precisely that. For example, President Ronald Reagan left office with the top tax rate at 28%, down from 70% when he was sworn in in 1981 which lead to another GOP victory in 1988.
President George W. Bush also lowered the 39.6% top marginal tax rate under President Bill Clinton down to 35% during his administration. If Trump reverses that trend, it would be a break from conventional Republican governance.
Although Trump has not been much of a fiscal conservative in his spending, he has championed his tax cuts and the positive economic impact they have. Meanwhile, some have claimed that his imposition of tariffs is the same thing as a tax increase, NPR reported.
Since taking office, Trump has imposed 25% tariffs on goods from Mexico and Canada and 10% to 20% on goods from China. Trump sees this as a way of forcing companies to make products in the U.S., while his detractors claim it will simply be another cost passed on to consumers.
The chatter from unnamed officials about a tax hike comes as Republicans worry about the serious ramifications of such a move. Treasury Secretary Scott Bessent warned of "economic calamity" if lawmakers fail to extend the cuts.
During his confirmation hearing, Bessent said they must extend the cuts to avoid imposing a "crushing $4 trillion tax hike" on the nation. He made his case to the Senate Finance Committee before ultimately being confirmed.
"Today, I believe that President Trump has a generational opportunity to unleash a new economic golden age that will create more jobs, wealth, and prosperity for all Americans. We must make permanent the 2017 Tax Cuts and Jobs Act and implement new pro-growth policies to reduce the tax burden on American manufacturers, service workers and seniors," Bessent said.
"This is the single most important economic issue of the day. If we do not renew and extend, then we will be facing an economic calamity and, as always with financial instability, that falls on the middle and working class people," Bessent added.
Even if Trump is in discussions about allowing the higher earners to pay more taxes, it doesn't mean it will happen. These kinds of reports are meant to demoralize supporters and give ammo to his opposition, but only time will tell whether any of this is true.
