Trump’s Proposed Tax Hikes Are a Mistake

May 14, 2025 Hank Russell Op Eds Comments Off on Trump’s Proposed Tax Hikes Are a Mistake

By Steve Levy

President Trump is floating up trial balloons on possibly seeking a tax increase for the highest earners to help fund other parts of his budget, which would include an elimination of taxes on tips, overtime and Social Security.

The tax hike is a counterproductive, bad idea, and here is why.

First off, I have no love lost for the super rich in our country. I’m not one of them. I would not be impacted by a proposed increase on those making over $2.5 million a year. 

Nor would 99% of other Americans.

There is a tendency for those who would not be impacted by the tax to say, “Great idea, tax them. Why not? No skin off my nose. Raise their taxes and it’ll put more money into the coffers so we can spread that money for helping those in the middle and lower economic levels.”

But, unfortunately, history has shown that raising taxes on the rich does not necessarily provide us with greater income equality. To the contrary, cutting taxes across the board leads to more, not less, money into our federal treasury. And that can lead to extra money to help the needy and to spur our economy so that working-class people have more jobs, more upward mobility, and higher wages.

So the reason to oppose this tax is not to protect some rich fool smoking his fat cigar on his fancy yacht. It’s to make sure that it doesn’t create a drag on our economy. 

Taxes were cut across the board numerous times over the past 75 years and, in each case, the federal government saw more, not less, money coming into the government.

When Democrat John Kennedy took office in 1961, the top tax rate was an astonishing 91%. Kennedy’s proposed tax cut was signed into law by his successor, Lyndon Johnson, in 1964. 

The $48.7 billion collected from income taxes in 1964 increased to $48.8 billion the following year. As the effect of the tax cuts kicked in by 1966, the government was collecting a robust $55.4 billion, followed by $61.5 billion in 1967, and $68.8 billion in 1968. https://taxfoundation.org/data/all/federal/federal-tax-revenue-source-1934-2018/

The reason is obvious. The lower tax rates led to higher investment, especially from higher earners, which in turn spurred the economy and led to more jobs and higher incomes that could be taxed.

In the 1980s, Ronald Reagan reduced the top rate from 70% to 50%, and even further in his second term, to 38.5%. Cuts were implemented across all income tax brackets.

Federal income tax collections in 1981 were $286 billion. By 1982, they were $298 billion, with a dip to $289 billion in 1983. However, once the tax cut kicked in, tax receipts soared to $335 billion in 1985 and $349 billion by 1986. In 1987, a further tax cut was implemented, dropping the top tax rate to 38.5%. That led to an increase of collections from $393 billion in 1987 to over $400 billion in 1988.

Then came the tax cuts of 2017.

Many bureaucrats predicted a sharp loss of revenues if the proposed tax cuts were enacted. As the House Ways and Means Committee report notes, these predictions prove to be inaccurate.

The truth is, the Trump tax cuts resulted in economic growth that was a full percentage point above CBO’s forecast, and federal revenues far outpaced the agency’s predictions. In fact, under Trump tax policies in 2022, tax revenues reached a record high of nearly $5 trillion, and revenues averaged $205 billion above CBO predictions for the four years following implementation of the law. 

Following the passage of the Trump tax cuts:

  • Real median household income rose by $5,000 – a bigger increase in just two years than in the prior eight years combined. 
  • Wages increased 4.9 percent, the fastest two-year growth in real wages in 20 years. 
  • The poverty rate and unemployment rate reached their lowest levels in 50 years, with all-time lows in unemployment among African-American and Hispanic workers, and those without a high school degree.
  • The bottom 20 percent of earners saw their federal tax rate fall to its lowest level in 40 years.
  • Americans earning under $100,000 received an average tax cut of 16 percent.
  • The share of taxes paid by the top 1 percent of households increased while the tax burden paid by lower income earners decreased. https://waysandmeans.house.gov/2024/05/09/despite-cbos-predictions-trump-tax-cuts-were-a-boon-for-americas-economy-and-working-families/

According to the CATO Institute, the 2017 Tax Cuts and Jobs Act was projected to lower revenue by $1.5 trillion over ten years by the Joint Committee on Taxation at the time of passage. However, because the law boosted investment, wages, and economic growth, revenues outperformed the static projections that didn’t account for the economy’s dynamic response to tax cuts. https://www.cato.org/blog/did-tax-cuts-jobs-act-pay-itself 

According to the Tax Foundation, individual income tax collections and receipts from corporate taxes increased in the years after the Trump tax cuts of 2017. https://taxfoundation.org/data/all/federal/federal-tax-revenue-source-1934-2018/

Individual income tax receipts increased from $1.7 trillion to $1.8 trillion to $1.98 trillion from 2016 to 2018.

After slashing the corporate tax from 35% to 21% in 2017, many pundits predicted a mass cratering of the amount of corporate taxes collected. Their predictions proved inaccurate, as corporate taxes increased from $430 billion to $451 billion from 2017 to 2018, the first year after tax cuts took effect.

The Ways and Means Committee noted:

Corporate tax revenue is shattering records under Republican tax reform.

Trump owes his popularity to his strong economy that was the result of the tax cuts. Why mess with that now? 

Note: Long Island Life & Politics is asking its readers in a new poll whether or not Trump should raise taxes on the rich.

Steve Levy is Executive Director of the Center for Cost Effective Government, a fiscally conservative think tank. He served as Suffolk County Executive, as a NYS Assemblyman, and host of “The Steve Levy Radio Show.”