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Trump adviser Steve Bannon is supposedly pushing for higher taxes on the rich to pay for middle/working-class tax cuts. As Axios reporter Jonathan Swan reports: “Bannon has told colleagues he wants the top income tax bracket to ‘have a 4 in front of it.’”
Even if the Trump White House proposed raising the top rate just a smidgen to 40% from the current 39.6%, it would be a pretty big deal in a modern GOP built around the “supply-side,” tax-cutting doctrine. (And remember, what’s really key for supply-siders is lowering that top marginal tax rate.) Many conservative Republicans, such as Paul Ryan, deeply believe lower rates are the maximum driver for faster economic growth. The Bannon plan would also be directly opposite from the most recent iteration of the Trump tax plan, which proposes 35% top rate.
Now before going any further, The Weekly Standard’s Michael Warren reports that the White House has no plans to support higher tax rates, and that Bannon’s proposal was from earlier in the process. But Bannon’s thinking here might be the shape of things to come for the GOP as it deals with an influx of working-class voters. Warren on that tension: “The more downscale voters the GOP has attracted in recent years, even before Trump’s presidency, may be less keen than Republicans of years past on keeping tax cuts for millionaires and billionaires.”
Here is Reihan Salam, back in April, on that same point:
And as the coalitional deck is shuffled and reshuffled, we can expect that positions Republican lawmakers have embraced for years won’t be the ones they’ll take a few years hence. 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. Would the tax policies championed by the Club for Growth and Americans for Tax Reform necessarily be the best fit for this new GOP? Might new pressure groups emerge that will champion new priorities, such as using the tax code to give working- and lower–middle-income families more of a leg up?
Also, keep in mind that this Bannon news pops up just when some Republicans are considering leaving Obamacare’s investment taxes in place to help finance subsidies to purchases insurance.
By the way, Hillary Clinton proposed a 4% surtax during the 2016 presidential campaign. As Politico reported at the time, the additional tax would have hit roughly 0.02% of taxpayers, or those with an income of more than $5 million, and raised roughly $150 billion over a decade (on a static analysis basis). But if Bannon wants to pay for big tax cuts, the Hillary plan seems insufficient. Indeed, the Axios report makes it sound like higher rates would merely be applied to the current top tax bracket, which kicks in around the $400,000-$500,000 range.