President Donald Trump urged House Speaker Mike Johnson to incorporate two new proposals into a major legislative package: raising the tax rate for the highest earners and closing the carried interest loophole. These requests were made during a private phone call on Wednesday, complicating ongoing efforts by Republican lawmakers to find fiscal savings within the bill, which aims to extend Trump’s 2017 tax cuts, enhance immigration enforcement and defense funding, and raise the debt ceiling.
The idea of increasing the tax rate on the wealthiest Americans had been under discussion by the White House for months, and a proposed reversion of the tax rate for individuals earning over $2.5 million annually from 37% back to 39.6% is being explored as a means to fund tax cuts for middle and working-class citizens while preserving Medicaid.
Historically, raising taxes on high earners has faced resistance from GOP leadership, with Trump previously dismissing such hikes as economically disruptive. However, with ongoing negotiations proving challenging for House Republicans, there has been renewed consideration of these proposals as potential solutions to meet fiscal targets.
House Republican discussions over these proposals have intensified, indicating a shift as the urgency to identify budget savings grows. The House Ways and Means Committee is set to review its portion of the reconciliation bill next week, grappling with additional issues, such as increasing the cap on the state and local tax deduction (SALT). GOP leaders aim to finalize and pass the legislative package before Memorial Day, an ambitious timeline amidst these emerging complexities.
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