This Ain't No Dream We're Living Through Tonight

First: why? The proposal itself is a brainchild of the conservative American Compass thinktank, which, in a June 2024 white paper, proposed raising taxes upon the wealthy to pay down the American national debt. “The constituency and base of the Republican party is shifting,” Oren Cass, American Compass’s founder, told the Atlantic in April. To extend Trump’s 2017 tax cuts by simply adding $5tn to the American national debt would be, in Cass’s words, “pathetic, embarrassing, and outright cheating”.

Steve Bannon, like Cass, has long fretted about the contradiction between the Maga movement’s populist posture and its upwardly redistributive governance. “This is a 1932-type realignment, if we do this right,” Bannon told Semafor in December. “You have to break that mindset that stock buybacks are fine, that crony capitalism is fine, and the tax breaks for the corporations are fine, then you’re going to squander a unique moment in history.”

Republican leaders are responding with the previously unthinkable: proposals to raise some taxes on the rich. Indeed, Trump reportedly floatedthe idea and some GOP lawmakers are considering creating a new top tax bracket.

This has touched off an intraparty civil war. On one side are those who came of age in the Reagan and George W Bush epochs – Newt Gingrich, Sean Hannity, the former vice-president Mike Pence, Americans for Tax Reform’s Grover Norquist, the hedge-funder-turned-GOP senator Dave McCormick, and the Club for Growth’s Stephen Moore. This old guard believes Republicans can still get away with depicting billionaire giveaways as populism, and vilifying tax hikes on the rich. […]

On the other side are newfangled Maga voices – the former Mitt Romney staffer Oren Cass, Vice-President JD Vance, the former Trump strategist Steve Bannon, and reportedly Trump’s budget director, Russell Vought. They sense political peril in Republicans presenting themselves as populists while their party enriches billionaires and corporations.

“We have to increase taxes on the wealthy,” Bannon said in December. This month he added that conservatives must prove “Republicans are not the country club Republicans”, which is “why it’s so important to not extend the tax cuts for the wealthy”.

Lower top rate. The 2017 law cut the top individual income tax rate, which now applies to taxable incomes over roughly $730,000 for married couples, from 39.6 percent to 37 percent. Some House Republicans have reportedly considered including a higher top rate in their bill — such as 40 percent for people with taxable incomes over $1 million — but President Trump and House Speaker Mike Johnson have both rejected the idea.^[21]

Allowing the top rate to revert to 39.6 percent while extending all of the 2017 law’s other expiring provisions would still give households in the top 1 percent a $40,000 average annual tax cut, according to the Tax Policy Center.^[22] That’s because most high-income households receive large tax cuts from the law’s other provisions, like the pass-through deduction (see below), and also benefit from the law’s rate cuts that apply to the lower tax brackets. Still, even this modest change would be a welcome departure from the failed “trickle-down” approach to tax policy.