Trump Seeks Tax Hike on Top Earners

(Reuters)
By Yuval Rosenberg

Habemus papam! We have a new pope - and for the first time, he is American. Cardinal Robert Francis Prevost, a 69-year-old who grew up in the Chicago area, was elected Thursday and took the name Leo XIV. His first address to the thousands gathered in St. Peter's Square and millions more around the world was delivered in both Italian and Spanish, beginning with the blessing, "Peace be with you all."

Here's what else is happening.

Trump Seeks Tax Hike on Top Earners: Reports

As Republican lawmakers scramble to find ways to offset the revenue losses from their massive but still unfinished package of tax cuts, President Trump has signaled that he would support raising taxes on some high-income households.

Trump reportedly told House Speaker Mike Johnson on Wednesday that he should raise the top marginal tax rate from 37% to 39.6%, effectively allowing the 2017 tax cuts to expire for some high earners. For the 2024 tax year, the income level at which the highest marginal rate kicked in was $609,350 for single filers and $731,200 for married couples filing jointly, but Trump has suggested that the top rate take effect at much higher levels, $2.5 million for single filers and $5 million for joint filers, according to reports by Punchbowl News and Bloomberg.

Trump also told Johnson he should consider eliminating the carried interest loophole, which some Wall Street investors use to lower their tax rate on certain kinds of investment income.

Reversing course: Trump had talked about raising taxes on the rich last month but ultimately dismissed the idea. "You'll lose a lot of money if you do that," the president told reporters in April. "And other countries that have done it have lost a lot of people. They lose their wealthy people. That would be bad, because the wealthy people pay the tax."

The idea has resurfaced now as GOP lawmakers are getting desperate to find ways to offset the tax cuts and increased defense and border security spending they want to enact, with some now discussing the possibility of scaling back their proposed cuts due to concerns about the debt and deficit. House Ways and Means Committee Chair Jason Smith will reportedly head to the White House tomorrow to discuss tax options.

Still, it's not clear that Republicans will embrace the idea of tax hikes of any kind. Johnson has been cool to the idea, saying in April, "I'm not in favor of raising the tax rates because our party is the group that stands against that traditionally."

Worried about a potential loss in faith, powerful tax cut supporters made their views clear. Grover Norquist, president of Americans for Tax Reform, said his group "opposes any effort to increase income tax rates on individuals or businesses," adding that "Trump ran on making all the tax rates reductions permanent." And David McIntosh, president of Club for Growth, said in a statement that, "This is not a serious option, and it is political suicide."

Another hurdle: In another sign of trouble for the GOP tax package, Republican lawmakers from New York rejected an offer today from Johnson and the Ways and Means Committee to raise the state and local tax (SALT) deduction from $10,000 to $30,000, saying it's not enough. Raising the limit is a key demand by lawmakers from high-tax states like California, New York and New Jersey, but it comes with considerable cost - just another part of the puzzle Republicans need to solve before they can move forward on their tax bill.

"[N]o notice or agreement, the Speaker and the House Ways and Means Committee unilaterally proposed a flat $30,000 SALT cap-an amount they already knew would fall short of earning our support," said Reps. Elise Stefanik, Andrew Garbarino, Nick LaLota and Mike Lawler. "It's not just insulting-it risks derailing President Trump's One Big Beautiful Bill."

Trump Announces Trade Deal With UK

President Trump on Thursday unveiled the outline of a trade agreement with the United Kingdom, the first agreement with a major trading partner since his "Liberation Day" announcement last month of a new slate of significantly higher global tariffs.

"It's very conclusive and we think everyone's going to be happy," Trump said in the Oval Office, flanked by officials including the British ambassador to the U.S. and Commerce Secretary Howard Lutnick, with U.K. Prime Minister Keir Starmer joining on the phone. "Many countries want to make a deal, and many countries are very unhappy that we happened to choose this one."

More work to do: Despite Trump's tribute, the agreement is not complete and leaves many issues to be worked out later. Notably, no documents were signed on Thursday. According to The Wall Street Journal, the outline or framework, "which appeared to have been put together hastily by U.S. and British officials, is fairly limited in scope."

Trump admitted as much, saying the final agreement will take more time. "The final details are being written up," he said. "In the coming weeks, we'll have it all very conclusive."

Still, Peter Navarro, Trump's top trade adviser, said the agreement "offers a template for how we're going to proceed with the rest of the negotiations," adding that "there will be many more to come."

The framework: Key elements of the framework include a 10% baseline tariff on British goods coming into the U.S. The U.K., which has a trade deficit in goods with the U.S., had not been subject to higher "reciprocal" tariffs that Trump announced for many other nations in April, but the baseline tariff remains, suggesting it could be a permanent feature in other trade agreements.

The framework also includes agreements to purchase specific products, including the acquisition of Boeing jets by the U.K.; an agreement to open the U.K. market to more U.S. goods; and tariff-free quotas for specific types of products such as steel and autos. (For more details, see this rundown by the Associated Press and the White House fact sheet.)

One perhaps surprising component is the reduction of the tariff from 25% to 10% on British luxury cars, including Rolls-Royces, Jaguars and Range Rovers. "It's a very special car, and it's very limited number, too," Trump said of Rolls-Royce, a "super luxury" car he said he has owned. "That's really handmade stuff, they've been doing it for a long time in the same location," he added. "So I said, 'Let's help them out with that one.'"

What analysts are saying: Beata Caranci, chief economist at TD Economics, told the Associated Press that the agreement is "more symbolic than economic." She added that in general, "these initial announcements are going to be more fine-tuning around the edges and easing of pain points, rather than an end to the trade war."

Some analysts were more critical. "From the point of view of markets generally, as well as those who are concerned about the U.S. economy, this is a nothingburger," Tim Meyer, an international trade law professor at Duke University School of Law, told Bloomberg. "There's nothing really to see here. Obviously, this is a framework, this is not actually an agreement."

Justin Wolfers, the University of Michigan economist who has been sharply critical of Trump's trade initiatives, said the U.K. framework does little to ease the effects of Trump's global trade war. "Overwhelmingly the most important fact about today's trade deal is that the 10% across the board tariffs are staying," he wrote on social media. "Tiny tweaks here and there with some trading partners won't change that. The US is a high tariff country for the foreseeable future, and the trade war continues."

Chart of the Day: Trump's Tariffs

Following the announcement of the framework for a trade agreement between the U.S. and the U.K., economic analyst Joey Politano released this chart showing the effective tariff rate since President Trump took office, noting that the reduction in tariffs on some British goods had very little effect - a 0.06% change - on the overall rate the U.S. is imposing on its imports.

FBI Director Backtracks on Request for More 2026 Funding

FBI Director Kash Patel on Wednesday told House lawmakers that he needed more funding than the White House requested in its recent budget outline and warned that the bureau would not be able to fulfill its mission and would have to cut thousands of jobs if a proposed $545 million cut was enacted. Instead, he asked for an $11.1 billion budget, a $1 billion increase. On Thursday, Patel abruptly reversed course and told a Senate hearing that he agreed with the White House's proposal.

Patel's budget comments Wednesday were a rare and highly unusual public disagreement between an agency and an administration. "President Trump's handpicked FBI Director just admitted that the budget requested by his Administration is not enough to meet the needs of the agency," said Rep. Rosa DeLauro, the top Democrat on the House Appropriations Committee.

Patel said Thursday he'd make the White House funding level work. "We will make and agree with this budget as it stands," he said, "and as the head of the FBI I was simply asking for more funds because I can do more with more money."

Acting FEMA Head Fired After Defending the Agency

The Trump-appointed acting administrator of the Federal Emergency Management Agency was fired Thursday, a day after he told congressional lawmakers that the agency was vital and should not be dismantled.

"As the senior advisor to the President on disasters and emergency management, and to the Secretary of Homeland Security, I do not believe it is in the best interest the American people to eliminate the Federal Emergency Management Agency," Cameron Hamilton, the acting FEMA head, testified at a House Appropriations hearing Wednesday. "Having said that, I am not in a position to make decisions and impact outcomes on whether or not a determination as consequential as that should be made. That is a conversation that should be had between the President of the United States and this governing body."

Hamilton also told lawmakers that, while FEMA workers are "tremendous and amazing," the agency also has some antiquated systems and processes that must be improved.

But his support for keeping FEMA intact clashed with criticism of the agency by President Trump and Homeland Security Secretary Kristi Noem, who have called for it to be eliminated. Trump has suggested that states should take primary responsibility for disaster response, and his administration is reportedly considering raising the threshold for federal disaster assistance.

"President Trump has been very clear since the beginning that he believes that FEMA and its response in many, many circumstances has failed the American people, and that FEMA, as it exists today, should be eliminated in empowering states to respond to disasters with federal government support," Noem said at Wednesday's hearing.

David Richardson, the assistant secretary at the Homeland Security office for countering weapons of mass destruction, is replacing Hamilton. "He does not appear to have any experience in managing natural disasters," NPR notes.

Quote of the Day

"The picture of the world's richest man killing the world's poorest children is not a pretty one."

− Billionaire Microsoft co-founder Bill Gates, repeating harsh criticism of Elon Musk, the world's richest man, over cuts made by Musk's Department of Government Efficiency to the U.S. Agency for International Development, the government arm responsible for much foreign aid.

In an interview with the Financial Times, Gates reportedly said that Musk did not understand what USAID did or how it worked. He warned that the abrupt nature of the cuts could lead to a rise in diseases such as measles, polio and HIV. "I'd love for him to go in and meet the children that have now been infected with HIV because he cut that money," he reportedly said of Musk.

Gates on Thursday announced plans to ramp up his philanthropic giving over the next 20 years and wind down the Gates Foundation in 2045. "People will say a lot of things about me when I die, but I am determined that 'he died rich' will not be one of them," Gates wrote in an online post. "There are too many urgent problems to solve for me to hold onto resources that could be used to help people."

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