(NewsNation) — The 2024 presidential election is in full swing and a 900-page conservative policy playbook known as Project 2025 has drawn attention for its sweeping vision of a Republican-led future which Democrats have called “dystopian.”
The comprehensive report provides a roadmap for the next Republican president and calls for an overhaul of the U.S. tax system that would include fewer tax brackets, the elimination of most deductions and a lower corporate tax rate. If enacted, those changes would have a major impact on Americans’ finances.
President Joe Biden has warned that “Project 2025 will destroy America” and says the project gives handouts to the ultra-wealthy at the expense of working families.
Here’s what Project 2025 says about the U.S. tax system and what it could mean for your wallet.
What is Project 2025?
Project 2025 is a set of GOP policy proposals spearheaded by the Heritage Foundation, a conservative think tank in Washington, D.C. The plan spans nearly 900 pages and provides a blueprint for the next Republican administration.
“It was designed to create an across-the-government smorgasbord of conservative policies,” co-author Ken Cuccinelli recently told NewsNation.
Democrats have blasted the plan, calling it the “most extreme platform in GOP history” and warned it will “gut democratic checks and balances.”
The report’s authors say the project will help conservatives hit the ground running when they retake the Oval Office and “undo the significant damage” done during the Biden years.
Former President Donald Trump has distanced himself from the project and insisted he knows nothing about it.
Fewer tax brackets under Project 2025
What the plan calls for: Two income tax rates — 15% and 30% — and eliminating “most deductions, credits and exclusions.”
How it works now: Currently, there are seven federal income tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, 37%. Those rates are based on income tiers: The more money you make, the higher rate you pay.
For example, a single taxpayer making $50,000 a year would pay 10% in federal income tax on the first $11,600, then 12% on their earnings from $11,601 to $47,150 and 22% between $47,151 and $50,000.
Today’s structure is an example of a progressive tax system — those who make more, pay more and those who make less pay less.
Project 2025 argues that the current system is too complicated and wants to replace it with a two-bracket model, 15% and 30%. The 30% bracket would begin “at or near the Social Security wage base” which is currently $168,600, according to the proposal. Those making under that amount would pay 15%.
The plan argues that simplifying the tax system would substantially cut tax compliance costs, which it says cost Americans more than $400 billion annually.
Project 2025 also calls for an end to “most deductions, credits and exclusions,” although it doesn’t go into specifics.
What it could mean:
- Replacing the 10% and 12% brackets with a 15% rate could raise the tax burden on those making less than $47,150 a year. Middle-class earners would also pay higher taxes on their first $47,150 but pay a lower rate on their income between $47,150 and the suggested $168,600 threshold.
- A middle-class family with two children and an annual income of $100,000 would pay $2,600 in additional federal income tax if they faced a 15% flat tax on their income, Brendan Duke, senior director for economic policy at the left-leaning Center for American Progress, recently told CBS News.
- By comparison, a married couple with two children and earnings of $5 million a year would enjoy a $325,000 tax cut, he estimated.
- The exact impact would depend on which deductions and tax credits get eliminated.
Changes to corporate income tax under Project 2025
What the plan calls for: Reducing the corporate income tax from 21% to 18%.
Project 2025 says the corporate income tax is “the most damaging tax in the U.S. tax system” and recommends lowering it to 18%. It asserts that the “primary economic burden” of that tax falls on the workers, though research disputes that characterization.
How it works now: Since the Tax Cuts and Jobs Act (TCJA) of 2017, the federal corporate tax rate has been 21%, down from the 35% rate before that and more in line with the worldwide average.
The impact of that change continues to be debated. One study from 2023 found the corporate rate cut increased domestic investment by 20%. Another paper found workers’ earnings gains were concentrated among the top 10% of earners, while the bottom 90% saw no change.
Those in favor of a lower corporate tax argue that it will help stimulate economic growth and encourage more investment in the United States.
Opponents contend that corporate tax cuts primarily benefit big businesses and the wealthy at the expense of everyday Americans. There are also concerns further reductions could lead to a tax revenue shortfall. Corporate income taxes accounted for 6.5% of total U.S. tax revenue in 2022, according to the Tax Foundation.
Changes to taxes on investment income under Project 2025
What the plan calls for: 15% tax on capital gains and dividends.
How it works now: Americans pay a capital gains tax when they sell an asset for a profit. That tax applies to a range of investments including stocks and fine art, though the specific rate varies based on two primary factors: how long you’ve held the asset and how much you earn.
If you have an asset for over a year and then sell it for a profit, it’s classified as a long-term capital gain. Today, a single taxpayer making between $47,025 and $518,900 would pay a 15% rate. High earners above that level pay 20%. Short-term capital gains, for assets held less than a year, are even higher.
Project 2025 wants to reduce the capital gains tax to 15% for high earners. The plan would also eliminate the net investment income tax (NIIT), an extra 3.8% levy on investment income if your modified adjusted gross income hits a certain threshold, $200,000 for single filers.
If enacted, the plan would be “a substantial cut in taxes for people who make their money in investments,” Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, recently told CNBC.
On the other side of the aisle, President Biden’s 2025 budget proposal calls for raising capital gains taxes on the wealthy. Under his plan capital gains would be taxed at the same rates as wages for households with more than $1 million in income.
Whether Biden’s proposal would result in more taxes being collected is an open question. Because capital gains tax is assessed when assets are sold, higher taxes cause investors to sell their assets less frequently, which ultimately leads to less taxes being assessed, the Tax Foundation notes in an analysis.
Project 2025’s trade policies
During his first term, Trump levied tariffs on thousands of products, starting a trade war with China to force Beijing to change its practices. So far, the Biden administration has kept most of the Trump tariffs in place.
If re-elected, Trump has signaled he intends to tighten trade policy further, floating ideas like a universal 10% tariff on most foreign goods.
Project 2025 lays out multiple paths for trade policy. In one scenario, the president would have the authority to match the tariffs a foreign partner imposes on U.S. goods. That would be made possible if Congress enacted the U.S. Reciprocal Trade Act. As it currently stands, the president is limited in their ability to fight back high tariffs with trading partners, the report notes.
Another option proposed in Project 2025 is a border adjustment tax, which would eliminate the ability of corporations to deduct the cost of imports while eliminating the tax on income attributable to exports.
The Trump-Biden tariffs have come at a cost to Americans, amounting to an average annual tax increase of $625 per U.S. household, according to the Tax Foundation.
Other policy suggestions that could impact your wallet
- Universal Savings Accounts: Project 2025 suggests allowing taxpayers to contribute up to $15,000 in a tax-advantaged savings account similar to a Roth IRA. Investment gains would be non-taxable and the money could be withdrawn whenever for any reason.
- Consumption Tax: The proposal argues that a consumption tax like a national sales tax is “the least economically harmful way to raise federal tax revenues” because it minimizes the government’s involvement in private decisions.
- SNAP food benefits: The project suggests a number of reforms. One could result in more recipients facing work requirements in order to receive benefits. Another proposal suggests changing eligibility requirements for those who are on other federal programs.
- Student Loan Forgiveness: Project 2025 calls for major cuts to federal loan forgiveness programs for student loan borrowers. Specifically, it would eliminate the Public Service Loan Forgiveness initiative, which offers debt cancellation to nonprofit and government workers after a period of time.
- More political control of the IRS: The plan would expand the number of White House appointees and freeze the IRS budget at its current level.
- Eliminate Green Energy Tax Credits: Project 2025 calls for all tax increases that were passed as part of the Inflation Reduction Act to be repealed.
- Change Federal Reserve mandate: The proposal says “full employment” should be eliminated from the Federal Reserve’s mandate and instead the Fed should focus on “price stability alone.”