Trump goes to war with the wealthy to shore up Maga base

Telegraph

26-05-2025

Donald Trump has never been a likely Robin Hood figure. But even a billionaire US president knows he needs to work on his image sometimes.
After promising tax cuts on the campaign trail, Trump now claims he wants to raise taxes on the rich.
'People would love to do it – rich people. I would love to do it, frankly,' he told reporters in the Oval Office earlier this month.
'What you're doing is you're giving up something up top in order to make people in the middle-income and the lower-income brackets save more. So it's really a redistribution, and I'm willing to do it if they want.'
Lawmakers have reportedly been discussing a range of different ways to target America's highest earners, with measures that could rake in an extra $400bn (£300bn) over a decade.
In doing so, Trump is trampling on the bedrock of traditional Republican ideology and causing uproar in the Grand Old Party.
But as Republicans prepare their 'big, beautiful bill' for tax and spending, which includes $880bn in cuts to public health insurance for poor households, Trump needs to find ways to take care of his low-income Maga support base.
The bill was passed on Thursday by the House of Representatives and will now go to the Senate, but it is still possible that it could be subject to changes.
Trump's Oval Office comments followed a Truth Social post in which he said he would 'graciously accept' a tax increase on the rich, but added: 'In any event, Republicans should probably not do it, but I'm OK if they do!!!'
It was not his first hint. 'I love that, I actually love the concept,' Trump said during an interview with Time magazine at the end of April, when he was asked about raising taxes on millionaires.
'He's trying to be populist,' says William Gale, co-director of the Tax Policy Centre and a former senior economist on President George HW Bush's council of economic advisers.
Adam Michel, the director of tax policy studies at the Cato Institute, says: 'I think Trump has people around him who are not Republicans and who think that the class warfare message that Democrats have run on in the past is a winning one, and some of that has bled through into his thinking.'
The archetype non-typical Republican in Trump World was once Steve Bannon, Trump's former chief strategist. While he is no longer on the inside, he has been pushing the idea of taxes on the wealthy in a sign of the kind of thinking filtering through Maga land.
Bannon said earlier this month: 'I believe that if we can't cut federal spending that the wealthy in this country, at least the millionaires, are [taxed at] 40pc, as a start.
'We have a capitalist system with very few capitalists. I think 75pc of people don't own any real financial assets. So we have to have fundamental change in this country and part of that has to come from the tax structure.'
Reports suggest that three options could be on the table. On a call with House Speaker Mike Johnson, Trump discussed the possibility of letting his 2017 tax cuts expire for the highest earners, according to CNN.
During his first term, Trump cut the top tax rate, which is currently charged on individual income exceeding $626,350 (or on income above $751,600 for married couples), from 39.6pc to 37pc.
If this rate reverted to 39.6pc, it would affect 1.5m households and mean $409bn in extra tax revenues over a decade, according to the Tax Foundation.
Households in America pay state taxes on top of the federal tax rates. In high tax states such as California and New York, top rate tax payers would face a marginal rate of more than 50pc.
The second idea, which has been discussed by members of the Ways and Means Committee, is to create a new top tax bracket for those earning $2.5m or more, with a rate of 39.6pc.
The Tax Foundation calculates that this would hit up to 200,000 households and raise nearly $70bn over 10 years.
Another alternative, which Fox News reported White House aides were quietly floating among House Republicans, is to raise the income tax rate for people earning more than $1m to 40pc. The Tax Foundation calculates this would raise $275bn over a decade.
'It seems there is a contingent within the White House that just likes higher taxes, whether they be on individuals or on traded goods,' says Michel.
While the numbers involved may sound appealing, in every case the Tax Foundation warned that overall income would be significantly reduced because the tax rise would hit growth.
Still, Trump may well be more concerned about what he could lose if he does not at least talk about soaking the rich.
Several pollsters have warned that Republicans could lose support from the Maga base as a result of the Medicaid cuts within Trump's Budget.
In April, top Trump campaign pollster McLaughlin & Associates found that 78pc of Trump supporters in battleground congressional districts supported the Medicaid programme.
It followed similar polling by Tony Fabrizio, another Trump polling guru, who found that the majority of Trump voters opposed Medicaid cuts and two thirds of swing voters said they disapproved of reductions in the health programme to fund tax cuts.
However, the instinct to raise taxes on the wealthy to help protect the Maga base stands in stark contrast to the bedrock of Republican ideology, which is to push for lower taxes.
'Tax cuts are the one thing that unites the Republican Party,' says Gale.
The vast majority of Republican lawmakers in both the Senate and the House have signed what is known as 'the Pledge' – a commitment organised by old-time Republican activist Grover Norquist to never vote for tax rises.
Norquist told The Atlantic a tax rise on the rich was 'an incredibly destructive idea economically, and very foolish politically',
But the old guard does not necessarily have its finger on the pulse. Many of the votes that carried the party to victory in 2024 were not for the Republicans but for Trump alone.
'We're changed the electorate in the Republican Party. We are a working-class and a middle-class party,' Bannon said this month.
It was the Democrats' failure to grasp the importance of fundamental economic issues that pushed so many lower-income Americans towards Trump, Bannon argues. The president forgets this at his peril, he believes.
'They want to cut $880bn out of Medicaid, but you can't do it because Maga is on Medicaid,' Bannon said.
As things stand, wealthy families will rake in cash from tax and spending changes in the pipeline while low-income families are going to lose money.
There are three key parts to the 'big, beautiful bill'. The first is the extension of the sweeping tax cuts that Trump introduced in 2017, which are due to expire at the end of this year.
The second element is a fleet of extra tax cuts that Trump promised on the campaign trail, such as scrapping taxes on tips and overtime. The third is a series of spending cuts to try and balance the books.
Even though many lower and middle class households will technically benefit from some of the tax cuts, the loss of health insurance coverage means the poorest fifth will lose about $940 in 2026, according to the Penn Wharton Budget Model. Meanwhile, the top 10pc highest income households will get 65pc of the benefits from the legislation.
As well as helping to even the scales when it comes to who benefits, taxing the rich would also help to balance the books. Although the spending cuts are dramatic, they are nowhere near large enough to cover the cost of the tax cuts.
The bill currently envisions $4.5 trillion in net tax cuts over the next decade, but only $1.5 trillion in spending cuts, says James Knightley, chief international economist at ING.
This matters because the public finances are already a mess. America has a debt problem.
Moody's last week stripped the US of its last triple-A credit rating as it warned that Trump's plans to extend his 2017 tax cuts will add $4 trillion to the US federal deficit over the next decade.
It was the last of the big three credit rating agencies to downgrade America.
US federal government debt is forecast to balloon from 98pc of GDP to 134pc by 2035. As a result, investors are growing increasingly nervous about the sustainability of US borrowing.
Yields on 30-year US Treasuries surpassed 5pc on Wednesday after the passage of the existing bill as investors demanded higher rates for debt that they now view as more risky.
A tax raid on the rich to balance the budget might help to ease those jitters.
However, for all Trump's Robin Hood talk, he may struggle to make the policy happen. Tax is an area where Trump cannot resort to executive order.
The bill is now progressing to the Senate. If any changes are made they will have to be signed off by the House of Representatives again, where Republicans have only a slim majority. Strong-arming this majority into backing something that goes against a central tenent of old-school ideology may be a stretch.
'Trump has always surprised me in his ability to get Republicans to lay down and take things that they're never believed before,' says Michel.
'So I don't want to say that he wouldn't be able to do it. But I think that it would be a really big lift.'