GOP rejects ‘millionaire tax' pitch, advancing breaks for rich Americans

Yahoo

28-05-2025

House Republicans rejected a push by some allies of President Donald Trump to include tax hikes on the rich in sweeping legislation they passed last week - a decision that could carry repercussions into next year's elections.
For a moment, though, that outcome seemed uncertain. On May 7, the anti-tax activist Grover Norquist had about 15 minutes before boarding his flight to Poland this month when his phone rang - with a call from the president. In the time before the plane took off, Trump gave his arguments for raising taxes on the rich in the sweeping Big Beautiful Bill that congressional Republicans were working on. Norquist pushed back, arguing that such a maneuver would prove a politically disastrous 'attack on the small-business community,' he said of the call. Shortly after landing in Warsaw, Norquist received a follow-up call from House Speaker Mike Johnson (R-Louisiana), who told him the tax increase would not be in the final legislation.
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The legislation House Republicans approved last week extends tax cuts Trump signed into law in 2017, cutting rates across income groups, including large benefits for the Americans who pay the highest share of federal income tax - those in the top 5 percent of the income distribution. The measure excluded a 'millionaire tax,' and other proposals to raise taxes on top earners pitched by Stephen K. Bannon, the president's first-term chief strategist, and other allies of the president. The Senate could make further changes, but Republicans in the upper chamber are expected to prove even less likely to back higher taxes on the top income bracket, several analysts said.
The issue may help define the upcoming battle over the GOP's key legislative achievement ahead of the 2026 midterm elections. While Sen. Josh Hawley (R-Missouri) told reporters last week that Trump is still pushing legislation to raise taxes on private-equity groups, the GOP is poised to largely reprise the strategy of its 2017 tax bill, which the party struggled at times to sell to voters the following year. Democrats attacked that legislation as skewed for the rich - and won control of the House in 2018 - but efforts to reorient the GOP around a more populist policy program this year appear to be stalling.
'We showed how weak and nonexistent this quote-unquote 'movement' for higher taxes is within the Republican Party,' Norquist said. 'The House and the Senate have been in lockstep: This is not happening, period. But I'm glad we had this movement because it allowed us to expose this little cancer cell in the party pushing the idea.'
Now, the GOP tax bill would deliver larger gains to affluent Americans than middle- or working-class households, several analyses have found.
The White House has pointed to estimates showing average-income Americans would also receive a substantial tax cut, and to a provision that would cut a tax benefit for wealthy owners of sports teams.
But the legislation includes several measures that critics say disproportionately benefit Americans at the top of the income distribution. It extends the tax cut Republicans first approved in 2017 for the highest income bracket, those earning more than $626,000 per year. The bill passed by the House also expands the estate tax (or 'death tax,' as many conservatives refer to it), which would not apply to fortunes of up to $15 million, or $30 million for married couples. It also increases a tax deduction for certain businesses formed as 'pass-through' entities, for which owners pay taxes on their individual income tax returns.
Most of the bill's more than $2.5 trillion price tag comes from measures that primarily benefit middle-class taxpayers, such as increasing the child tax credit and the standard deduction paid by most Americans. But because rich households have higher taxable incomes, lowering rates by about the same size across income brackets means significantly larger savings for the affluent.
The average American would receive a roughly $1,700 tax cut from the bill in its first year, according to the Institute on Taxation and Economic Policy, a left-leaning think tank. By contrast, the top 1 percent of earners - making more than $920,000 - would receive an average tax cut of close to $70,000 in the first year after enactment, the think tank found. Taxpayers earning more than $3.4 million per year would receive a roughly $275,000 boost in 2027, while the bottom 40 percent of the income distribution - or those with less than $13,000 in annual income - would go down due to cuts to social programs such as Medicaid and food stamps, a Yale Budget Lab analysis found.
Because there are so many more taxpayers earning moderate incomes than those earning high salaries, most of the bill's cost would go to tax cuts for the non-rich, even though higher-income taxpayers would, on average, see bigger benefits. Roughly 30 percent of the benefits of the House GOP bill would go to corporations and those earning more than $400,000 per year, according to a rough estimate cited by Jessica Riedl, senior fellow at the Manhattan Institute, a center-right think tank.
The biggest beneficiaries of the bill would be those earning between $460,800 and $1.1 million per year, a category primarily composed of small-business owners and high-income professionals such as lawyers and doctors, according to Kyle Pomerleau, senior fellow at the American Enterprise Institute, a center-right think tank. After that, the top 1 percent are the biggest winners, Pomerleau said.
'It's a complete shifting of resources up to the wealthiest Americans - that's the bottom line of it,' said Steve Wamhoff, a tax policy expert at ITEP.
GOP policymakers reject these criticisms. The White House Council of Economic Advisers argues that average take-home pay would see a short-run boost of between $7,800 and $13,327, along with more than 7 million additional jobs saved or created and an investment boom up to 15 percent.
One White House official, speaking on the condition of anonymity to reflect the administration's thinking, pointed to an estimate by the nonpartisan Joint Committee on Taxation showing that people making between $30,000 and $80,000 would pay around 15 percent less in taxes in 2027. The official said there was a reason that Democrats' criticisms of the legislation have focused on its cuts to Medicaid, rather than its benefits for the rich.
The tax cuts at the top end of the income scale also significantly benefit millions of businesses whose owners pay taxes on their individual income returns, said Doug Holtz-Eakin, president of the American Action Forum, a center-right think tank. Many of the Americans who appear to be in the top 1 percent and would see a tax cut only temporarily have high incomes - perhaps because of a one-time sale of their business - and are not part of the billionaire elite of Democrats' imagination, Holtz-Eakin said.
Even tax legislation that helps the rich could prove popular. Doug Heye, a GOP strategist, argued that the party's setbacks in 2018 were more due to Trump than the tax plan specifically and that it will take time for voters to react viscerally to the measures in this legislation. 'There's been a lot of Democratic talk, but it's way too early to say' what the political impact of the 2025 tax bill will be, Heye said.
The current legislation also includes some populist measures, such as reducing taxes on income through tips, not in the 2017 bill. And the legislation would leave the corporate tax rate unchanged, despite a push from the private sector to lower it again.
But Republicans don't seem to be explicitly going after the rich - a strategy some Democrats had feared could change the dynamic in next year's midterms. Bannon had pitched Trump not just on allowing the tax cut for the top bracket to expire, which would effectively be a tax increase, but also on creating a new bracket for those earning more than $1 million per year. These ideas had drawn support from some of Trump's top aides in the White House. But GOP lawmakers ultimately showed little appetite for such measures, at least in the House.
'What we're seeing is the center of gravity in the Republican Party is still much closer to where it was under Mitt Romney than is commonly thought - there's support for Trumpian nationalism, but it's not the dominant disposition in the way a lot of people think it is,' said Michael Strain, economist at the American Enterprise Institute. 'Rather than there being no Republicans who want to boost taxes on the rich, there are just very few.'
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Theodoric Meyer contributed to this report.
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