In a notable shift from traditional Republican policy, President Donald Trump has proposed raising taxes on high-income earners to help finance broader tax cuts for middle- and working-class Americans.

The plan would increase the tax rate for individuals earning over $2.5 million annually from 37% to nearly 40%, returning it to the pre-2017 level of 39.6%.

A source familiar with Trump's thinking explained that the change is aimed at funding tax relief and safeguarding Medicaid, the public health program for low-income citizens. The move has sparked criticism from conservative groups, who argue it resembles Democratic proposals.

Trump's plan comes as lawmakers discuss extending his 2017 tax cuts, which are set to expire next year. These talks have also exposed divisions within the Republican party over how to finance the new fiscal package.

In addition to targeting wealthy individuals, Trump is open to ending the favorable tax treatment of hedge fund and private equity earnings, known as "carried interest", a change that would impact Wall Street. Lawmakers are also considering raising the cap on state and local tax (SALT) deductions from $10,000 to $30,000, offering potential relief to property owners in wealthier areas.

Despite resistance from some Republicans, House Speaker Mike Johnson expressed confidence that a compromise would be reached. Nonetheless, Trump's proposed tax hikes have stirred controversy among anti-tax conservatives, who see them as a departure from core Republican values.

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