Republicans Propose 40% Tax Rate for Millionaires to Fund Reforms

Republicans are lobbying for a fresh 40% tax bracket for American millionaires. The proposed legislation is geared toward financing tax reform before central Trump-era reductions lapse in 2025.

The move contrasts with the more traditional GOP measures that have previously rejected tax hikes. The quest for the fresh tax bracket stokes debate surrounding the party’s changing position regarding taxation.

New tax bracket for high earners

Republicans are drafting a plan to introduce a new 40% tax bracket for people making more than $1 million a year. House aides, Senate members, and even members of the Trump administration are discussing the plan. If it passes, the tax will be on the richest Americans, a high point in deviation from the traditional Republican opposition to tax hikes.

“I’ll believe it when I see it.” Groundwork Collaborative’s Kitty Richards discusses a House that proposal would set the new rate at 40% for taxpayers earning $1 million or more a year, according to people familiar with the matter https://t.co/YvCYqokXOD pic.twitter.com/CqLF3LwiIh

— Bloomberg TV (@BloombergTV) April 15, 2025

This proposal comes as the deadline for President Trump’s initial round of major tax cuts is closing in. With tax provisions scheduled to end in 2025, Republicans must find a means to pay for new tax deals. Increasing taxes on the wealthy is being considered as an option. Some Republicans feel it will bring much-needed balance between paying for tax overhauls and covering fiscal requirements.

Potential issues for business owners

Business owners, particularly those with LLCs or partnerships, might suffer substantially from the increased 40% rate. They pay taxes in accordance with individual rates, so the new tax rate can damage their profitability. Most Republicans worry that it may inflict damage on small businesses and diminish the opportunities for jobs.

GOP’s Changing Tax Stand

Historically, the GOP has been against tax increases, especially on high-income earners. But this new proposal is a departure from that stance. Some interpret it as a practical response to budgetary pressures, while others interpret it as a political move to rally the party. Either way, it is a dramatic departure from the conventional Republican tax orthodoxy.

The proposal to tax American millionaires at a higher rate is a turning point for GOP tax policy. Although it might help pay for necessary reforms, it might offend some party members. As the debate rages on, Republicans have to choose between reconciling fiscal responsibility with their long-standing opposition to raising taxes.