Trump’s flirtation with millionaire tax increase gets strong pushback from the right

President Trump is getting heat from his right flank for declaring he loves the concept of a millionaires’ tax increase even though he says he knows it would be used against him politically.

Trump made the declaration in an interview with Time magazine and then quickly distanced himself from the proposal to raise the marginal tax rate for people earning more than 1 million dollars per year.

But the president’s warm embrace of “the concept” of raising taxes on millionaires is causing an uproar among traditional conservatives and business groups even while some Trump allies on Capitol Hill say they’re open to it as long as Trump is on board.

Grover Norquist, president of Americans for Tax Reform, a prominent conservative leader, said Senate and House Republicans have been telling Trump “this is a really bad idea.”

“This idea is dead,” he declared. “It ain’t happening.”

Norquist said that while Trump may have said he loves the concept of raising taxes on the wealthy, he’s come to his senses and realizes that doing so would be “political death” as it was for former President George H.W. Bush, who lost his 1992 reelection after breaking his pledge, “Read my lips: No new taxes.”

“This is the dumbest idea that I’ve ever heard,” Norquist said. “It’s never going to be in the reconciliation package,” referring to the budget bill that will be used to enact Trump’s legislative agenda.

Norquist said Trump is on the record repeatedly saying he would support tax cuts for all Americans, the wealthy included, a position strongly supported by the overwhelming majority of GOP senators.

“Do you know how many times he’s on video saying we’re going to have a tax cut for every single American, upper class, middle class?” he said. “And how many times on tape he vilified Kamala Harris” for wanting to raise taxes on upper-income Americans and small businesses?

Yet Trump appeared to pivot on the issue when asked by Time about “some Republicans” who are “considering raising taxes on millionaires.”

“I certainly don’t mind having a tax increase, and the only reason I wouldn't support it is because I saw Bush where they said, where he said, ‘Read my lips,’ and he lost an election,” Trump told the magazine.

Trump dismissed the argument that he would be raising taxes if he increased the tax rate on the wealthy to give more tax relief to the millions of working-class Americans who voted for him.

“I'd be raising them on wealthy to take care of middle class. And that's — I love, that. I actually love the concept, but I don't want it to be used against me politically, because I've seen people lose elections for less, especially with the fake news,” he said.

A Republican strategist and former senior congressional aide said Trump’s comments sparked alarm on the right.

“The more institutional conservative groups are losing their minds, but I have also talked to a number of conservative House members who are not opposed to it and in fact would be fine with it as long as it’s paired with House-level spending cuts and Medicaid reform. They’re willing to do it,” the strategist said.

Trump made his comments to Time in an interview Tuesday but then backpedaled when asked about the idea Wednesday.

“I think it would be very disruptive, because a lot of the millionaires would leave the country,” he said. “Now with transportation so quick and so easy, [people] leave countries. You lose a lot of money if you do that.”

The idea appears to have some traction in the more populist House, where conservatives led by Rep. Chip Roy (R-Texas) and other fiscal hawks are warning they won’t support a new tax relief and spending package that blows up future federal deficits.

Senate Republicans are warning that the budget reconciliation package to secure the borders, expand domestic energy production, increase defense spending and extend the 2017 tax cuts won’t pass if it raises the tax rate on the top income bracket or creates a new tax bracket for people earning more than 1 million dollars annually.

“That idea is going to go over like a shot dog,” a Senate Republican aide said. “I can count on one hand the number of Republicans who would support raising the rate on top earners, because you’re slamming a lot of small-businessmen who have significant wage income.

“That’s not healthy for the economy, particularly because we’re going to be going into a slowdown because of Trump’s trade policies,” said the source.

Richard Stern, the Director of the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation, a leading conservative think tank, said Sunday that a higher top tax rate would be "counterproductive" and discourage entrepreneurship. 

"The Heritage Foundation believes in limited taxes, and we oppose efforts to raise federal tax rates to or beyond 40%. Congress needs to get its fiscal house in order, but it must do so by tightening its own belt, not by forcing American taxpayers to tighten theirs," he said in a statement to The Hill. 

"A higher top tax rate would be counterproductive, discouraging hard work and entrepreneurship. Punishing those who provide for others and create jobs is a recipe for failure," he warned.

So far, a few Republican senators said they would be open to raising the tax rate on the rich if it helps pay for more tax relief for working-class Americans, but many more are opposed and staying quiet for now.

Sen. Kevin Cramer (R-N.D.) said earlier this month that there had been talk of higher tax rates for the wealthy during conference lunch meetings, describing the conversation as “interesting.”

But Cramer in an interview last week on Fox Business noted the wealthy already pay a huge chunk of the federal budget.

“The top 1 percent of earners in this country pay 46 percent of the income taxes. That’s a pretty significant number. I don’t know that you want to disincentivize that kind of behavior.

“It’s not our system,” he said. “I think we had a good formula in 2017," he continued, referring to the Tax Cuts and Jobs Act, which cut the top income tax rate to from 39.6 percent to 37 percent.

Sen. Josh Hawley (R-Mo.) told The New York Times this month that he would be open to raising some taxes on the wealthy to pay for more tax relief for middle- and working-class Americans, as long as the president is on board.

“I think we need to cut taxes for working folks, so if the president wants to offset that, then I’m definitely open to it,” Hawley told the Times. “I would go so far as to argue that’s the core of his base. So we need to do something for those folks.”

Sen. Thom Tillis (R-N.C.), who faces a tough reelection race next year, said he’s also “open” to increasing the tax rate on the wealthiest earners if it’s carefully crafted to avoid hitting small-business owners.

But other Senate Republicans are slamming the door on the idea.

“I am strongly opposed to raising taxes,” Sen. Ted Cruz (R-Texas) said right before the Easter recess.

More than 90 trade associations wrote a letter to Senate Finance Committee Chair Mike Crapo (R-Idaho) and House Ways and Means Committee Chair Jason Smith (R-Mo.) urging them to “stand strong and oppose any effort to increase income tax rates.”

The letter, organized by the S Corporation Association, warned that raising the rate on the top income tax bracket would “disproportionately” hit small businesses.

“This idea is presented as a modest adjustment affecting only the wealthiest Americans, but it would disproportionately harm hundreds of thousands of pass-through businesses organized as S corporations, partnerships and sole proprietorships,” the groups wrote.