Yesterday was tax day, which would’ve been a good time for the White House to put to rest all the rumors of a Republican tax hike. Instead we got a Bloomberg article entitled: “Millionaire Tax Hike Gains Steam as Trump Signals Openness.” Now openness doesn’t mean the President would sign off on it. Knowing him, he’s open to discussing a lot of things that he ultimately rejects. That’s why I believe this is something he will ultimately reject. Promises made, promises kept. I don’t believe Mr. Trump will sign on to a tax hike.
The promise was made to extend the 2017 tax cuts, which includes keeping the 37% top bracket, 3 percentage point cuts down the line for the lower brackets, a doubling of the standard deduction, a doubling of the kiddie credit, a lower tax rate on repatriated foreign income, a 21% corporate tax rate, and 100% expensing for machinery and equipment. The Bloomberg article suggests the need for higher tax rates as a pay for. But this doesn’t make sense because Mr. Trump and the House and Senate Republican leaders have all agreed to the current policy baseline, which merely extends the 2017 tax cut — and would be deficit neutral. And by the way, 44 Republican Senators and about 180 Republican House members have signed Grover Norquist’s ‘no tax’ pledge.
So if Mr. Trump pushed a tax hike, the big, beautiful reconciliation bill would be destroyed.
Also as Mr. Trump knows, the top personal tax rate is paid by small business owners of LLCs or S corps. Which really comprises the bulk of the jobs and income generated in the economy. Small business owners are already concerned about the impact of higher tariffs, so why hit them again with a higher tax bill?
Mr. Trump is a champion of small business. Always has been. He’s also well acquainted with the Laffer curve as he presented Dr. Laffer with the Presidential Medal of Freedom during his first term. The Laffer curve argues that higher tax rates will generate lower revenues through weaker economic activity and greater tax avoidance. A lot of the wealthy can afford top flight tax accountants and they will avoid paying more in taxes. By the way the top 1% of tax payers already pay 45% of the income tax, nearly half.
Then the article goes on to say higher rates on top earners could offset an expanded state and local tax deduction. But that only really impacts high earners. So let me get this right, Trump would raise the tax on high earner, but at the same time lower the tax burden by giving the same high earners a bigger tax deduction? Doesn’t make any sense. And the President is a common sense kind of guy.
Unfortunately some Treasury officials have been out there talking about how “everything is on the table” or many many ideas are being studied to minimize the total cost of the tax bill. But these officials would be much better advised to stick to Trump policy that he intends to extend the highly successful 2017 tax cut bill.
Now Mr. Trump has added some tax additions: tax-free tips for service workers, and tax-free overtime, and tax relief for seniors. He has also added a 15% ‘made in America’ corporate tax to incentivize onshoring. And immediate expensing for factory investment, retroactive to January 20, 2025, also to incentivize onshoring. These fall outside the current policy baseline. But rather than raise some taxes to finance tax cuts, why not tap into either the Elon Musk DOGE savings, or whatever tariff revenues are being estimated.
Mr. Trump has always believed in rewarding success, not punishing it. The kid in the garage, or the Main Street small businesswoman, or the successful investor should not be penalized for becoming wealthy.
Mr. Trump is determined to reprivatize our economy, adding plenty of new dynamism and risk taking in the process. He has said so a million times. Why would he want to raise to stifle this?
These are all reasons why I do not believe he’s gonna go for tax hikes.
