White House adviser Steve Bannon is pushing for a tax hike on the top income bracket in order to balance massive middle and working class tax cuts and a steep reduction in the corporate rate.
Bannon, the leader of the populist faction in the West Wing, has told colleagues that he wants the top marginal income tax rate to “have a 4 in front of it,” Axios reported. The highest tax bracket is currently 39.6 percent for Americans who earn more than $418,400.
Bannon’s proposal, which comes as the Trump administration negotiates with Congress over a tax reform package, is in keeping with his distaste for GOP orthodoxy on economic issues. Any rate hikes in the administration’s tax proposal are likely to be met with protest from Congressional Republicans and White House economic advisers, who oppose raising taxes on the wealthy.
The idea also contradicts the White House tax plan released in April, which called for lowering the top tax rate to 35 percent. It’s unclear if the administration is seriously considering reversing course on top earners. The Weekly Standard’s Michael Warren reports that there are no plans for the White House to modify its original proposal or support raising the top marginal rate.
“We’re beyond that,” a senior administration official told the Weekly Standard.
Bannon’s call for raising rates on high earners is the only tax hike proposed by senior administration officials. Treasury Secretary Steven Mnuchin and White House economic adviser Gary Cohn, the administration’s point men on tax reform negotiations, are pushing for across-the-board cuts to marginal income tax rates and a reduction in the corporate rate from 35 percent to 15 percent.
Wrangling over tax policy, both inside the White House and on Capitol Hill, has intensified as the administration pushes hard for progress on tax reform. After recent legislative setbacks to the GOP effort to repeal and replace Obamacare, Republicans are now pinning their hopes on passing a tax bill before the 2018 midterm elections.
The White House appears to be warming up to an idea, endorsed by the House Freedom Caucus and groups such as Americans For Tax Reform, that would allow tax cuts that raise the deficit to extend beyond 10 years. If Congress changes the budget rules to permit the extension, the White House wouldn’t have to make its tax proposal revenue-neutral and could ask for a more significant tax cut.
While that change appeals to conventional Republican tax-cutters in Washington, many voters in Trump’s working-class base could see the focus on tax cuts as a distraction from the president’s more populist positions on job creation and trade.
“Imagine a world in which Democrats continue to gain ground among high-income, college-educated voters in affluent suburbs while Republicans make further inroads among blue-collar whites in the Rust Belt,” Slate columnist Reihan Salam wrote about the White House tax proposal in April. “Would the tax policies championed by the Club for Growth and Americans for Tax Reform necessarily be the best fit for this new GOP?”
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