• Trump considers raising taxes on Americans earning $2.5M+ annually, reversing a key GOP stance.
  • The proposed 2.6% increase would fund middle-class tax cuts and protect Medicaid, but faces Republican resistance.
  • Fiscal conservatives scramble to offset costs as projections show trillions added to the deficit.

A Surprising Shift in Tax Policy

Former President Donald Trump has privately pushed House Speaker Mike Johnson to consider raising taxes on wealthy Americans—those making $2.5 million or more annually—from 37% to 39.6%, according to people familiar with the discussions. The move, which would mark a stark reversal from his 2017 tax cuts, aims to fund promised relief for working-class voters, including eliminating taxes on tips and overtime wages.

"This is to pay for working and middle-class tax cuts that were promised, and protect Medicaid," an administration official said, speaking on condition of anonymity. The proposal has already drawn skepticism from fiscal hawks, with Senator Mike Crapo (R-Idaho) expressing "misgivings" but acknowledging Trump’s influence could sway the party.

Political and Economic Fallout

Republicans, who have long opposed tax hikes, now face a delicate balancing act. Trump’s endorsement gives the idea momentum, yet even a few defections could derail it given the GOP’s slim majority. Meanwhile, Democrats have seized on the debate, accusing Republicans of targeting Medicaid—a move one strategist called "polling poison."

Financially, the math remains daunting. The Tax Foundation estimates Trump’s broader tax package could slash revenues by $4.5 trillion over a decade, ballooning the deficit. House Republicans are reportedly struggling to find sufficient Medicaid cuts to offset the proposed middle-class breaks, while Trump’s additional push to tax carried interest as ordinary income has rattled private equity.

What Comes Next?

The proposal remains fluid, with Trump himself acknowledging the "policy and political risks." Still, his willingness to break with GOP orthodoxy signals a sharper focus on populist economics ahead of the election. Whether Republicans follow his lead—or balk at the first major tax increase in decades—could define the party’s fiscal agenda for years to come.