• Trump proposes raising top income tax rate to 39.6% for high earners to offset middle-class tax cuts.
  • The plan includes treating carried interest as regular income, targeting private equity profits.
  • Republican lawmakers show mixed reactions, with some considering the move as politically strategic.

A Shift in Republican Tax Policy

Former President Donald Trump has privately suggested to House Speaker Mike Johnson that Republicans should consider increasing taxes on Americans making millions annually, according to administration officials familiar with the discussions. The proposal would revert the top marginal rate to 39.6% - the pre-2017 level - while preserving promised cuts for middle-income earners.

This marks a notable departure from traditional GOP orthodoxy, coming as Republicans face pressure to fund their proposed tax reductions without deep Medicaid cuts that polls show would be politically damaging. "We're looking at all options to deliver relief to working families while maintaining fiscal responsibility," said one Republican staffer involved in budget discussions, who spoke on condition of anonymity.

Carried Interest in the Crosshairs

The plan would also eliminate the preferential tax treatment of carried interest, currently taxed at capital gains rates around 20%. This change would primarily affect private equity and hedge fund managers, treating their performance fees as ordinary income. Industry groups have already begun lobbying against the measure, with one private equity executive calling it "a direct attack on investment partnerships."

Senate Finance Committee Chair Mike Crapo (R-Idaho) acknowledged the proposal's momentum but cautioned that "we need to examine the broader economic impacts" before supporting such changes. The discussions come as Republicans prepare to use budget reconciliation procedures to extend portions of the expiring 2017 tax law, which independent analyses show would reduce federal revenues by $4.5 trillion over a decade if fully renewed.

Political Calculus

The tax proposal appears designed to counter Democratic arguments that Republican policies favor the wealthy, particularly as Trump trails in recent polls. His campaign has separately floated eliminating taxes on tips and overtime pay - proposals aimed at working-class voters. Whether congressional Republicans embrace the millionaire's tax idea may depend on November's election results and the balance of power in the next Congress.

Multiple attempts to reach Trump campaign officials for additional comment were not immediately returned. White House economists are reportedly analyzing the potential effects of the proposed changes on investment activity and government revenues.