President Donald Trump is pushing lawmakers to increase tax rates on some of the wealthiest Americans as a way to offset other cuts in his signature economic package.

The president’s proposal calls for creating a new 39.6% tax bracket for individuals earning at least $2.5 million, or couples making $5 million, according to people familiar with the discussion.

The president made the request in a Wednesday phone call to House Speaker Mike Johnson. He also reiterated his desire to eliminate the carried interest tax break claimed by venture capital and private equity fund managers, one person said. 

Representative Jason Smith, the chairman of the House tax committee, is expected to meet with Trump on Friday and tell him the tax bill will deliver on the president’s priorities, a congressional aide said.

It remains unclear if the proposal would be accompanied by an expansion of the existing exemption for some small business income paid through the individual code. 

If Congress approves Trump’s plan for a 39.6% rate, that would bring the top bracket to a level not seen since before Trump’s 2017 tax cut. The current top rate for individuals is 37%.

Trump has sent mixed signals on raising taxes on the wealthy. He has mused that such a levy could spur rich Americans to relocate to other countries and that it could harm Republicans at the ballot box.

But the proposal comes as lawmakers are struggling to find a way to pay for a multitrillion-dollar package that Trump has dubbed the “one big beautiful bill” to extend his first-term tax cuts. 

Republicans are under increasing pressure to limit the cost of the overall bill because they are struggling to find agreement on cuts to entitlement programs, including Medicaid health coverage for low-income Americans.

Increasing taxes on top-earners gives Republicans more wiggle room to make Trump’s 2017 tax cuts for households permanent and enact some of his campaign pledges, including eliminating levies on tips and overtime pay.

Creating a new tax rate on millionaires would raise $67.3 billion over 10 years, according to a preliminary estimate provided to Bloomberg News by the non-partisan Tax Foundation. The group has previously projected that eliminating tax preferences for carried interest would raise $6.7 billion over a decade.

Raising taxes goes against longstanding Republican orthodoxy. Trump’s willingness to propose a tax hike for millionaires demonstrates how much he has remade the GOP in his own populist image. 

Commerce Secretary Howard Lutnick told Bloomberg Television that higher taxes on the wealthy is a “smart” move to free up more money to pay for Trump’s campaign proposals to cut taxes for hospitality workers and seniors.

However, top Republicans have balked at other proposals that would raise levies on affluent households.

Representative Kevin Hern, an Oklahoma Republican on the House tax committee, said increasing the top rate and eliminating carried interest are under discussion but there is no agreement yet.

“Anytime the president asks for something, we will consider it,” he said.

Senator Mike Crapo, who leads the Senate Finance Committee, told conservative radio host Hugh Hewitt on Thursday that he’s “not excited” about the proposal to raise taxes, but there are a “number of people in both the House and the Senate who are.” 

“If the president weighs in in favor of it, then that’s going to be a big factor that we have to take into consideration,” Crapo said.

The “big beautiful bill” touted by President Trump is getting closer, though the timeline remains imprecise. 

“There’s been some public reporting on tougher questions of spending cuts, but the difference between the tax bill this year and the Tax Cuts and Jobs Act in 2017 is that the inclusion of a lot of spending cuts in the same bill makes it more challenging this year. From the bill itself several categories are apparent,” said Stephen Eckert, a partner in the National Tax Office of Top 25 Firm Plante Moran. “There’s the extension of the TCJA extension, campaign promises, and a catch-all category. In some ways we would expect an extension of the vast majority of TCJA provisions, plus the campaign promises as well as potentially all the other things that get thrown in that we didn’t expect.”

“For example, S.711, the Transportation Freedom Act, sponsored by [Sen. Bernie Moreno, R-Ohio], which would give a 200% deduction for wages paid to auto workers. There is a broader category of things that could be coming to support certain industries,” he continued. 

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One looming question regarding campaign promises is the potential modification of the Inflation Reduction Act and green energy incentives, Ecker noted: “There has been opposition to certain changes there from Republicans — we’re watching to see what happens to the fate of energy efficient credits and incentives and to what extent they are modified under the bill.”

The House and the Senate are working in parallel, waiting for legislative text, he observed. “The non-tax portions of the bill will be worked on earlier, but until we get the actual text from the House Ways and Means  Committee, there will be questions. For example, there are multiple versions of some of the Trump proposals, such as the proposal to exclude tips and Social Security benefits from income. Each one is a little bit different. We expect changes but it’s unclear what the changes will be.”

Principles or tactics?

For Eckert, the real questions are about where the red lines are for certain members. For example, there have been statements  by some House members that they won’t vote for the bill if it includes a cap on state and local tax deductions. 

But are those actual red lines, or negotiating positions that will be softened? 

“At this point, businesses would just like some degree of certainty going forward,” he said. “Until then, it’s hard to engage in longer term planning. Hopefully, the bill will advance relatively soon so businesses will know what will be the law for the next couple of years and have a chance to plan for the future.”

The House and Senate are both actively working on their versions, and they are constantly interacting with each other, according to Miklos Ringbauer, founder of MiklosCPA in Southern California. “So instead of having A and B and then trying to figure out what they can create out of it, they are now jointly working on it, so it has a greater chance of passing across the board,” he explained.

However, there’s a bit of a gap in the size of the budget cuts in each bill, with the Senate version pegged at less of a cut than the House. And some want to double the SALT limitation, while some would prefer to see it go away altogether. 

“Likewise,the estate tax exemption,” he continued. “There are some that would like to see the entire estate qualify as exempt from tax. Those are some of the ideas floating around, but until it’s voted on by both chambers and the president signs it, there’s no law. Everything can change until the very last minute.”

Ringbauer noted that the TCJA required technical corrections and extensive guidance when it was passed in 2017, and he anticipates the same with this year’s bill: “There’s a very short overall window because the 2017 laws are expiring at the end of this year. Between May and December we have just a few months.”

“It looks like everyone is on board with expanding the availability of the Child Tax Credit on the individual side. It helped a lot of families at that time. It helped a number of families to get out of poverty,” he noted.

The reenactment of 100% bonus depreciation and the opportunity to fully expense R&D will be boons to business if they are, as expected, part of the legislation.

“It’s an exciting year for tax accountants; we are seeing a huge transformation of tax laws all over again,” Ringbauer said. “What could happen is, they simply reenact every part of the 2017 tax law legislation, or they could figure out what really worked and what didn’t work, and start adjusting some things and letting other ones expire.”

The International Ethics Standards Board for Accountants staff posted a questions and answers publication Thursday to support the adoption and implementation of its IESBA Tax Planning and Related Services Standards. 

The standards offer a principles-based framework and a global ethical benchmark to guide accountants in public practice and in business when they’re doing tax planning.

The Q&A publication highlights, illustrates and explains various aspects of the standards to help firms, jurisdictional standard-setters and accounting organizations adopt and implement the standards, and individual accountants apply them. The publication can also help tax authorities, the corporate governance community, investors, business preparers, educational bodies or institutions, and other stakeholders understand the standards.

The Tax Planning and Related Services standards take effect July 1, 2025.