Published May 14, 2025
Market fundamentalists are at it again, saying that supporting President Trump’s idea of raising the top marginal income tax for the ultra-rich will be the political kiss of death for Republicans. GOP Senators and Representatives should not drink their Kool-Aid.
The story that the anti-tax zealots peddle goes something like this. Back in 1988, then-Vice President George H.W. Bush came from behind in his presidential race by promising never to raise taxes. In 1990, however, he flipped and signed a big tax hike bill. He never recovered, doing poorly against primary challenger Pat Buchanan and losing to Bill Clinton in 1992.
The moral of this story is simple: the GOP brand is to be against tax hikes, always and everywhere. Break with this orthodoxy and certain defeat awaits.
There’s a morsel of truth to this tale. Bush did pledge not to raise taxes, famously intoning in his 1988 convention acceptance speech “read my lips: no new taxes”. He did break his pledge, and it was used against him in the primary and the general elections. He himself admitted going back on his word was perhaps the biggest mistake of his career.
What the peddlers of this sad lament don’t tell you, however, is that Bush’s tax hike is not at all comparable to what is being proposed today.
Bush raised taxes on everybody, not just the ultra-rich. His bill increased gasoline taxes by over 20%. It doubled the excise tax on beer and sextupled it on wine. Taxes on distilled spirits and tobacco also went up.
He also imposed a “gas guzzler” tax on new car purchases based on gas mileage. If you needed to buy a minivan or station wagon to ferry your large family around, chances are you paid $1,000 or more extra for the privilege.
If you drove, drank, had lots of kids, or smoked, your taxes went up. In other words, pretty much everyone got hit.
His income tax changes were also much more extensive and applied to many more people than what is proposed today. Trump is open to increasing the marginal income tax on individuals with $2.5 million or married couples with $5 million in annual income by 2.6%.
Bush in contrast raised marginal rates on married couples earning over $78,400 (equal to $186,272 today) by 3%. He also raised the income cap on the 1.45% Medicare payroll tax from $53,400 (equal to $126,874 today) to $125,000 (about $297,000 today).
This meant the upper middle class was paying thousands of dollars a year more in income taxes on top of their increased gas and excise taxes.
Bush raised taxes even more in other, trickier ways. His bill started to reduce itemized deductions for things like mortgage interest payments once a couple earned $100,000 in taxable income. Bush also started to phase out personal exemption (equal to $2,000 per person in 1990) once a family hit $150,000.
His tax bill also did not include any substantial tax cuts, unlike the 2017 Tax Cuts and Jobs Act and this year’s proposed bill. In short, almost everyone lost, and no one gained.
Neither Trump nor Congressional Republicans plan to raise taxes on everybody. Quite the opposite. Bush’s historic blunder is simply not analogous to what’s on the table today.
Some members might still worry that hiking taxes on one group of people to partially pay for tax cuts for others is bad politics. But that’s just not so.
The 2017 tax cut increased taxes for millions of families including many in the middle class. That was the inevitable result of so many dramatic changes in entrenched provisions like the state and local tax deduction.
That particular change hit so many people so badly that a group of GOP legislators from New York and other high state tax states want the cap raised to well over the $30,000 per return that the current draft bill offers. The Republican House members from these districts want their constituents to see tax cuts too, but the high priests of the church of supply-side aren’t lifting a finger to help them.
Many state-level tax reforms include tax increases on some people to help pay for cuts for the bulk of citizens, too. Anti-tax activists have praised recent bills that reduced income taxes in Louisiana and Mississippi, but those efforts also raised either the gas tax or the sales tax.
No one is predicting political doom for these Republicans. Why would raising taxes on millionaires and billionaires be more dangerous than raising taxes on average Joes?
It might surprise many Republicans in Congress that a large number of GOP voters support raising taxes on the well-to-do. A recent Pew Research poll found that 43% of GOP voters support hiking taxes on households earning more than $400,000, a share that increases to 48% among low-income GOP voters. A 2024 poll of voters in the seven swing states found that 56% of conservatives favored raising taxes on billionaires. Polling sponsored by American Compass even found that 56% of Republicans back raising taxes on households earning over $400,000 a year as part of an effort to reduce the deficit.
Members who back the President’s initiative will start any primary with significant support, plus the endorsement of the most popular figure bar none within the party. They can easily stare down the big-money donors and PACs who might want to fund a challenge for raising their taxes and those of their other friends in the donor class.
Nor need they fear that the small income tax rise will tank the economy. Bill Clinton raised the top marginal rate from 31% to 39.6% in 1993 and also eliminated the income cap on the Medicare tax. The top marginal rate on labor income therefore skyrocketed from 31% to 41.05% in one year.
The economy slowed down to a 1.4% real growth rate by mid-1995 but soon picked up steam. The rest of the decade saw strong, broadly shared growth, the last time America had that until Trump’s first term.
If a 10% increase in marginal rates on a much broader class of taxpayers didn’t kill growth, Trump’s much smaller and focused one won’t either.
Republicans may want to avoid the optics of increasing tax rates. That’s their choice. But they shouldn’t believe the doom and gloom coming from certain quarters, either.
The Republican Party today is a multi-ethnic, working-class party. The tax bill on offer will cut taxes for those voters and, at most, will barely touch the richest Americans. That’s a win for the economy and good political optics by anyone’s definition.
Henry Olsen, a senior fellow at the Ethics and Public Policy Center, studies and provides commentary on American politics. His work focuses on how America’s political order is being upended by populist challenges, from the left and the right. He also studies populism’s impact in other democracies in the developed world.
