- The Trump administration may let taxes increase for those in the top income bracket at the end of the year. The administration hopes it will help offset lower revenue from eliminating taxes on tips.
- Republicans are trying to pass a budget reconciliation package by April 7, an extremely tight schedule.
- They are also considering eliminating taxes on Social Security benefits and military retirement benefits.
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The Trump administration could raise the tax rate for the wealthiest Americans to eliminate taxes on tips. According to a report in Axios, administration officials believe it would help them fulfill a campaign promise while dampening criticism from Democrats as they try to extend President Donald Trump’s 2017 Tax Cuts and Jobs Act.
Technically, the administration wouldn’t need to raise the rate. They would just need to let that portion of the tax law expire, which it does at the end of this year.
What is the GOP tax plan?
Republicans are currently working on a budget reconciliation package to extend the tax law. However, projections show it will decrease the federal government’s revenue and increase debt. Increasing taxes on the wealthiest Americans could offset other provisions, such as eliminating taxes on tips.
The current highest tax rate is 37% for individuals making $609,351 a year or more or couples who make more than $731,201.
If lawmakers do not extend the Trump tax cuts, the top rate will jump to 39.6%, and the bracket income level will drop to $418,400 for individuals and $470,700 for couples.
What have Democrats said about the GOP tax plan?
Democrats say Republicans are only extending the tax cuts to help their wealthiest donors. If they let the highest rate increase, they could prevent some of those criticisms.
“If we renew tax cuts for the rich paid for by throwing people off Medicaid, we’re gonna get f–king slaughtered,” one administration official said.
Eliminating taxes on tips isn’t the only tax code change being considered. Republicans also want to eliminate taxes on Social Security benefits and military retirement benefits.
Sen. Pete Ricketts, R-Neb., just introduced a bill that would do both. He pointed out that the government did not tax Social Security benefits from 1935 until 1983. However, by 1993, 85% of the payments were taxable.
“These aren’t government handouts. They’re benefits people have earned,” Ricketts stated. “Seniors have paid into Social Security for decades. Veterans have given years of service to protect our freedoms. We should not be double-taxing them.”
Congressional Republicans hope to finish the budget reconciliation package by April 7. However, they currently do not agree on how to get it done or what to include. Given the significant changes they want to make, that timeline will be extraordinarily difficult.
Editor’s Note: Sen. Ricketts is the son of Joe Ricketts, the owner of Straight Arrow News.