Project 2025’s Vision for Restructuring U.S. Taxes

Project 2025, a comprehensive 900-page blueprint, aims to reshape the federal government if the next Republican president wins office. Among its proposals is a significant overhaul of the U.S. tax code. President Joe Biden and Democrats have recently cited Project 2025 to underscore potential changes should former President Donald Trump return to the White House, according to CBS News.

Project 2025 and Its Leadership

Overseen by the conservative Heritage Foundation, Project 2025 is led by Paul Dans, a former chief of staff at the Office of Personnel Management, and Spencer Chretien, a former special assistant to Trump. Despite the project’s associations, Trump has distanced himself, stating on Truth Social that he is unfamiliar with it, emphasizing his separate agenda, “Agenda 47.”

Major Tax Code Revisions

The tax proposals within Project 2025 would significantly impact all U.S. adults by dismantling the current multi-bracket system designed to provide tax relief to lower-income Americans. Currently, the U.S. tax system includes seven brackets ranging from 10% to 37%, based on income thresholds. For example, a married couple pays 10% on their first $23,200 of income, then 12% on income from $23,201 to $94,300, and so forth.

Project 2025 proposes simplifying this to just two tax rates: a 15% tax for incomes up to approximately $168,000 and a 30% tax for incomes above that. Additionally, the blueprint suggests eliminating most deductions, credits, and exclusions, though it lacks specifics on which ones would remain.

Economic and Social Impact

According to Brendan Duke, senior director for economic policy at the Center for American Progress, Project 2025’s tax system would shift the tax burden from the wealthy to middle-class families. For instance, a middle-class family earning $100,000 with two children could see their federal income tax increase by $2,600 under a 15% flat tax due to the elimination of lower brackets. If the Child Tax Credit were also removed, their taxes could increase by an additional $6,600. Conversely, a wealthy couple earning $5 million annually could benefit from a $325,000 tax cut.

Millions of households earning less than $168,000 could face higher taxes with a 15% rate. Currently, the bottom half of American taxpayers, earning less than $46,000 annually, pay an effective tax rate of 3.3%, factoring in deductions and credits.

Additional Economic Proposals

Project 2025’s other economic reforms include:

• Reducing the corporate tax rate to 18% from its current 21%, down from 35% before the 2017 Tax Cuts and Jobs Act (TCJA).
• Lowering the capital gains tax to 15% for high-income earners.
• Eliminating credits for green energy projects established by the Inflation Reduction Act.
• Considering a national consumption tax, such as a sales tax.
• Removing the Federal Reserve’s mandate to maintain full employment.

Challenges in Implementation

Implementing these tax changes would require Congressional approval, which could be challenging if either the House or Senate is controlled by the opposing party. Trump’s previous TCJA passed with a Republican-led Congress despite unanimous Democratic opposition.

Trump’s Tax Stance

Trump has not detailed specific tax proposals for a potential future term but is expected to seek extensions of the TCJA’s tax cuts, many of which are set to expire at the end of 2025. Analysts suggest he might fund these tax cuts by repealing clean energy provisions from Biden’s Inflation Reduction Act and cutting social benefit spending. Trump has also proposed a 10% tariff on all imports and a 60% tariff on Chinese imports, claiming these could replace federal income taxes. However, experts argue that tariffs alone would not generate enough revenue to cover the more than $2 trillion collected annually in individual income taxes, and would likely increase consumer prices.

Conclusion

Project 2025’s tax reform proposals reflect a significant shift in tax policy, favoring a simpler system that could place a greater burden on middle-class families. The blueprint, along with Trump’s separate agenda, highlights the ongoing debate over tax equity and economic policy in the United States. As the next election approaches, these proposals will undoubtedly be central to discussions about the country’s fiscal future.