That means the GOP has its best chance in more than a generation to implement a fundamental tax reform. Will one of the hallmarks of the tax reform bill that may end up on President Trump’s desk actually…raise the top marginal rate?
That’s what Jonathan Swan of Axios says one of the president’s top aides is advising him to embrace. Steve Bannon, the economic nationalist with a penchant for riling up the Republican establishment and its conventional wisdom, is reportedly “causing a stir” within the Trump White House by pushing for an increase on the marginal rate for the highest earners, which is currently at 39.6 percent. According to Swan, “Bannon has told colleagues he wants the top income tax bracket to ‘have a 4 in front of it.’”
Bannon’s suggestion to set the top rate at 40 percent or above would be 180-degree-turn from the actual White House proposal, which was released in April and lowers that rate to 35 percent. I’m told that Bannon may have offered this suggestion back when the administration was working on its proposal. But right now, as Trump’s tax reform team works with Congress on the details, there are no plans for the White House to modify its proposal or get behind the idea of raising the top marginal rate from where it is currently.
It would be ludicrous to assume any final tax reform bill would look exactly like the White House’s original proposal. Gary Cohn, the director of the National Economic Council, and Treasury Secretary Steve Mnuchin, go to Capitol Hill on a weekly basis to negotiate with GOP leadership and the Republican chairs of the tax committees.
And those Hill Republicans have been skeptical of the White House’s optimistic benchmarks for tax reform since the beginning. Simplifying the code (down to three brackets) and lowering rates has to get paid for somewhere if the plan is to be revenue neutral. Getting rid of nearly all deductions won’t cover it, and so the White House and Congress will have to hammer out details to make tax reform work. That could mean a top marginal rate higher than 35 percent. But higher than the current rate? Perhaps Steve Bannon is holding his own negotiations on the Hill, but it’s hard to believe there’s much more appetite in the Republican conferences for raising the rate than there is in the White House.