Trump Administration Weighs Raising Taxes on Wealthy to Fund Tip Tax Elimination

Preliminary discussions consider increasing the top tax rate to 39.6% while eliminating federal taxes on tips, but internal GOP divisions and fiscal concerns cloud the proposal's path forward.

The Trump administration is exploring a proposal to raise the top tax rate for the wealthiest Americans from 37% to 39.6%, returning it to pre-2018 levels.
In exchange, federal taxes on tips would be eliminated, fulfilling a key 2024 campaign promise aimed at appealing to working-class voters in the growing service-sector economy.
Discussions are still in early stages, with no final decisions made, as officials weigh political risks and potential economic impacts of the changes.
Critics warn that removing taxes on tips could create exploitable loopholes, allowing high-income earners to reclassify income and significantly reduce their tax burden.
The Congressional Budget Office estimates that extending the 2017 tax cuts, a priority for the administration, could add $4.6 trillion to the federal deficit over the next decade, intensifying fiscal debates.