Trump eyes tax hike on wealthy—here’s how a 39.6% top rate compares to historic levels Here's how the rate compares to recent history
President Donald Trump is eyeing a tax hike on the wealthiest Americans to fund his spending and tax package
As Republicans wrestle with funding their massive spending and tax package, President Donald Trump is eyeing a possible tax hike for the highest earners.
The idea, which lacks Republican support, could return the top federal income tax rate to 2017 levels for some of the wealthiest Americans.
In a phone call Thursday, NBC reported, Trump pressed House Speaker Mike Johnson, R-La., to raise the top income tax rate on the wealthiest Americans and close the so-called carried interest loophole. The proposal would revert the 37% rate to 39.6% for individuals making $2.5 million or more per year, to help preserve Medicaid and tax cuts for everyday Americans.
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Trump on Friday expressed openness to the tax hike on the wealthiest Americans in a Truth Social post, noting he would "graciously accept" the tax increase to "help the lower and middle income workers."
"Republicans should probably not do it, but I'm OK if they do!!!" he wrote.
Enacted by Trump, the Tax Cuts and Jobs Act, or TCJA, of 2017 created sweeping tax breaks for individuals and businesses. Most will sunset after 2025 without an extension from Congress.
The TCJA temporarily dropped the highest income tax rate from 39.6% to 37%. For 2025, the 37% rate kicks in for single filers once taxable income exceeds $626,350.
How Trump's idea compares to historic rates
If signed into law, a top 39.6% income tax rate would return wealthy taxpayers to pre-TCJA levels from 2013 to 2017. Before that, the top rate was 35% during most of the early 2000s, according to data collected by the Tax Policy Center. The highest top rate was 94% from 1944-1945.
However, this data doesn't reflect how much income was subject to top rates or the value of standard and itemized deductions during these periods, the organization noted.
Trump's tax package faces a 'math issue'
With control of Congress, Republicans can pass legislation through a process known as "reconciliation," which can sidestep the Senate filibuster with a simple majority.
However, there's still disagreement about what should be included in the multi-trillion-dollar bill and how to finance it.
Lawmakers face "a pretty simple math issue," with many proposals not covering the cost, Yale Budget Lab president and law professor Natasha Sarin told CNBC's "Squawk Box" on Friday.
"We're not getting anywhere close to the type of revenue increases we need," she said.
This story originally appeared on: CNBC - Author:Kate Dore, CFP®, EA
