Photo: EPA/UPG
Washington, 22 April 2025 – Discussions are underway within US President Donald Trump’s inner circle about a possible tax increase for Americans earning more than $1 million a year as part of the preparation of tax legislation for 2025. This was reported by two administration officials and three sources familiar with the internal discussions, The Washington Post reports .
The proposal, which has drawn a chilly response from Republicans in Congress, has the support of Vice President J.D. Vance and Budget Director Russell Vaught, who have expressed willingness to consider the idea. Stephen K. Bannon, Trump’s former chief strategist, has been publicly urging the president to support the plan, believing it will help neutralise criticism from Democrats who accuse Republicans of protecting the interests of the rich.
However, the idea is facing strong opposition from Trump’s longtime allies. Influential Republicans such as Newt Gingrich, Steve Moore and Larry Kudlow, as well as Fox News host Sean Hannity, are strongly opposed to tax hikes, arguing that they contradict Trump’s tax cut promises and could hurt economic growth. House Speaker Mike Johnson and Senators Dave McCormick and Ted Cruz have also expressed their opposition to the idea.
Gingrich posted a message on social media that he claimed came from Trump. In it, the president allegedly said that he was “not opposed to a small tax increase”, but that it could harm Republicans politically, so “it’s better to do without it”. The White House has not yet commented on this statement.
According to the sources, Treasury Secretary Scott Bessent is ready to consider various options, including raising taxes for those earning more than $5 million a year.
Challenges for the Republicans
The debate reflects the difficult fiscal situation facing Republicans as they try to extend the 2017 tax law, which could add more than $4 trillion in new tax breaks amid rising national debt. While some Republicans are proposing significant spending cuts, particularly to Medicaid for the poor, they are aware of the political risks of such moves, especially when it comes to extending tax breaks for the wealthiest Americans.
These challenges are prompting some Trump allies to consider raising taxes on the ultra-rich as an alternative. However, this idea is a challenge for a party that has been opposed to any tax increase for decades. Analysts believe that the proposal is unlikely to gain enough support in Congress.
“I don’t see it getting through the Senate Finance Committee – there’s no way,” said Doug Holtz-Eakin, president of the American Action Forum think tank. “They will see it as a punitive tax on the rich for no reason. They don’t like the politics or the economics of it.”
Bannon’s proposals and the ideological split
Bannon is actively promoting the idea of raising taxes on the wealthy, offering several options. One of them is to return the highest tax rate to the level that was in effect before 2017 (from 37% to 39.6% for those earning more than $626,350). Another option is to create a new tax category for those earning $1 million or more. The idea of an even higher rate for those with annual incomes of more than $3 million or $5 million is also being discussed.
“It destroys the Democrats’ narrative of ‘oligarchy,'” Bannon said, referring to the populist campaigns of Congresswoman Alexandria Ocasio-Cortez and Senator Bernie Sanders. He is convinced that raising taxes on the wealthy will be a political victory for the Republicans, as the party is increasingly relying on the working class vote.
At the same time, critics point out that raising taxes on millionaires’ income will not solve the problem of economic inequality. The wealthiest Americans derive most of their income from the growth in the value of their stocks, and Republicans are not yet considering raising taxes on capital gains or unrealised profits.
Political risks and the wider context
According to the federal government, in 2020, only 0.1% of Americans (approximately 150,000 tax returns) had an income of more than $2.6 million. Experts such as Steve Rosenthal of the Tax Policy Center point out that true wealth is not concentrated in income, but in assets such as unrealised gains or retirement savings that remain untaxed.
Republicans are also considering combining the millionaire tax hike with legislation that would increase the limit on the deductibility of local and state taxes from federal taxes, a restriction introduced in 2017. However, analysts believe that this idea is unlikely to be supported, as it would still worsen the situation of the wealthiest.
Vance’s openness to tax increases is a concern among conservatives, especially given his position as one of the top contenders for the Republican nomination in 2028. In 2023, Vance spoke out against further corporate tax cuts, and in the Senate he supported bipartisan initiatives to close tax loopholes for large companies.
Steve Moore, whom Trump had previously nominated to the Federal Reserve Board, called the idea of raising taxes a “potential crisis” for the party, comparing it to President George W. Bush’s mistake of supporting tax increases and losing political support.
Official position
A spokeswoman for Vaught declined to comment, while Vance’s spokeswoman Taylor Van Kirk noted that “only President Trump sets the administration’s agenda” and Vance is “fully committed to supporting and implementing those priorities.” The Treasury Department said it is considering a “wide range of options”, but that the priority remains to extend the 2017 tax law and repeal taxes on tips, overtime and social security.
The debate over raising taxes on millionaires highlights an ideological split in the Republican Party, where new populist movements are challenging the traditional conservative approach. While the fate of this proposal remains uncertain, it has already sparked a heated debate in US political circles.
