"Suicidal" Tax Cuts? Trump Undermines His Own Base: Plans to Raise Tax Rate to 39.6% on Wealthy

TradingKey – After facing fierce backlash over proposed cuts to Medicaid, U.S. President Trump, determined to extend his 2017 tax cuts and manage debt, has now turned his blade toward his own allies—considering higher taxes on the wealthy and eliminating the carried interest tax break for hedge funds and private equity profits.

On Thursday, May 8, the Financial Times reported, citing sources familiar with the matter, that Trump is weighing a plan to raise the top individual income tax rate from 37% back to 39.6% for those earning $2.5 million or more annually—a move aimed at funding tax relief for the middle and working classes while preserving Medicaid.

To offset revenue losses from extending his signature tax cuts, the Trump administration had previously explored slashing Medicaid and other social welfare programs for lower-income Americans, sparking widespread public outrage.

Now, in an effort to protect these benefits, Trump’s latest proposal seeks to generate revenue by hiking taxes on the wealthy—a move critics say amounts to sabotaging his own political foundation. Wealthy Americans have traditionally been a key voting bloc for the Republican Party.

Analysts argue that raising taxes defies long-standing GOP orthodoxy of tax reduction. Instead, the idea of increasing taxes on the rich aligns more closely with Democratic policies—similar to a proposal once floated by Democratic presidential candidate Kamala Harris.