House Republicans are seriously considering proposals to further limit tax deductions that companies can take on pay for their most-highly compensated officers and employees, expanding restrictions that now apply only to a handful of current or former executives making more than $1 million. The discussions are still fluid, however, and lawmakers haven’t settled on details that would determine which employees and employers would be affected. Further limiting these deductions would raise taxes on corporations and indirectly hit high-income households, but in a more politically palatable way than a straightforward increase in the top marginal income tax-rate that President Trump recently rejected.
Some Republicans acknowledge this is a rate increase on high-income households, but it falls on corporations in a way that comports with the growing populist views in the GOP. Some tax experts are warning, however, that the combination of existing individual income taxes and more restrictive corporate-tax deductions could push the effective marginal tax rate on some top earners’ income above 50%.