Donald Trump was already playing with economic fire with his tariff plan, something that is all but certain to stoke some degree of inflation, and slow the economy at least in the short term.
So why would he threaten to throw gasoline on the blaze over his weird flirtation with a millionaire’s tax, something that will divide the slim GOP majorities in the House and Senate, and imperil his big beautiful budget that includes much-needed tax-cut extensions to counter the economic drag of his tariff plan?
It’s a question I keep hearing from my GOP donor sources in the aftermath of some Trump weirdness in recent days, including pushing House Speaker Mike Johnson to include something in his budget increasing the top rate to 39.6% from 37% on individuals earning $2.5 million and above.
The culprits of this machination, they say, are the people in the MAGA wing of the party.
Those include the Wall Streeter-turned-populist Commerce Secretary Howard Lutnick, trade hawk Peter Navarro and even JD Vance, the VP who was once a Silicon Valley financier but has remade himself into a champion of the working man.
(People close to Vance say he’s not involved in this debate.)
These are the people who are said to be hawks on trade that upended the markets and signaled economic gloom before cooler heads like Treasury Secretary Scott Bessent started to cut deals.
But don’t blame the so-called messengers on trade or taxes.
If you hate this stuff, remember it’s Trump who gives them their marching orders.
As a person close to Trump told me: “To pay for middle- and working-class tax cuts, this is reasonable populism given it only affects individuals making $2.5 million-plus.”
I know it’s hard to feel sorry for these GOP donor fat cats, but truth be told, they’re not complaining about their own personal finances.
Yes, they make a lot of money and can afford one less nanny.
Republican civil war
Their worry is the potential of a gut-wrenching intraparty fight if Trump keeps pushing the tax increases on top of his tariffs that many Republicans can’t stand.
It would spark a GOP civil war on a matter that seemed to be settled science for the party for decades.
That would be tax increases on the rich don’t help anyone, even the intended beneficiaries.
In fact, they even hurt.
Veteran investor and market maven Doug Kass did a quick, back-of-the-envelope analysis, explaining it this way: “There are 70,000 US households that make over $2.5 million annually.” The proposed increase of 2.5% translates into maybe tens of billions of extra tax revenues for the US Treasury “assuming each family makes $2.5 million.”
Kass added that “obviously there are much higher earners, but not that many.”
Plus what’s a few billion dollars compared to an annual deficit of $2 trillion?
That’s right.
Taxing the fat-cat class doesn’t generate enough revenue to pay for the stuff Trump intends to fund.
(No tax on tips, etc.)
It also screws with successful small businesses that file taxes as individuals.
These taxes hurt growth because rich people and small businesses will spend less.
And they make a mockery of what nearly every Republican and their vaunted supply-side punditry on cable news has preached since Ronald Reagan.
Recall what happened to George H.W. Bush, who ran on a no-new-taxes pledge, reneged on his promise, then lost to Bill Clinton in 1992.
Here’s why this is now even more dangerous for the Republicans and Trump himself.
They need the new budget to include the tax cut because without it, the American people will face two tax increases.
Tariffs on all imported goods that are going to get more expensive no matter what deals are cut is the first tax increase.
Then throw in the expiration of the Trump 1 tax cuts if the GOP is distracted by a messy civil war over its Trump-forced inclusion of the millionaire’s tax.
That’s when you get your double-tax whammy.
Based on everything I’m hearing from my sources in DC, such division is exactly what will happen since so many GOP lawmakers including most of the Senate Republicans just won’t vote for a budget that includes this stuff.
Then the fun begins for the Dems, as many are now predicting.
The GOP could lose its majorities in the midterms — and a Dem majority in the House will mean Trump gets impeached again.
The Trump policies that involve cultural and security issues will be placed on the back burner; you could see the return of DEI, maybe open borders.
Plus, nothing gets done, while a Republican president gets blamed for the economic hit that two tax increases will likely create.
A DeSantis 2nd act?
President JD Vance?
Not a prayer.
The Trump-Vance coalition just squeaked by the bumbling Kamala Harris, who was left with the noxious economic baggage of Joe Biden to defend, namely inflated prices and low wages for average Americans.
The GOP better hope for a return of Ron DeSantis, who if you haven’t noticed, has been quiet through all the nonsense of tariffs and taxes, or Gavin Newsom might be our next president.
The good news: It seems unlikely at press time if Speaker Johnson will include the millionaire’s tax in the House budget proposal; it’s not in the early draft of his “big beautiful bill.”
The bad news: What I just outlined is something that Trump apparently doesn’t appreciate. Even after pushback from allies like Ted Cruz, he posted on Truth Social on Friday the following mess of contradictions about the tax hike: “In any event, Republicans should probably not do it, but I’m OK if they do!!!”
Talk about leadership!
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