Project 2025 would overhaul the U.S. tax system. Here’s what it could mean for you.

What are the objectives of “Project 2025”?


What are the objectives of “Project 2025”?

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Project 2025, a 900-page blueprint for the next Republican president, is gaining attention for its proposals to reform the federal government. One of those changes: a major overhaul of the U.S. tax code.

President Biden and Democrats have been touting Project 2025 in recent weeks, highlighting what could happen if former President Donald Trump wins the November ballot box and retakes the White House in January. Many of the proposals in the blueprint touch on economic issues that could impact millions of Americans, as well as social issues such as abortion and diversity, equity and inclusion, or DEI, issues.

Project 2025, which is overseen by the conservative Heritage Foundation, is led by two former Trump administration officials: project director Paul Dans, who was chief of staff in the Office of Personnel Management, and Spencer Chretien, a former special assistant to Trump and now the project's deputy director.

If passed, Project 2025’s tax proposals would likely affect all adults in the U.S. The multi-bracket system has been in place for a long time. It’s designed to ensure that lower-income Americans pay a smaller share of their income in federal taxes than middle- and high-income workers.

Currently there are seven tax brackets — 10%, 12%, 22%, 24%, 32%, 35% and 37% — each based on income thresholds. For example, a married couple pays 10% federal income tax on their first $23,200 of income, then 12% on income from $23,201 to $94,300, and so on. Married couples must earn more than $487,450 this year to hit the top tax rate of 37%.

Project 2025 argues that the current tax system is too complicated and expensive for taxpayers to navigate. To fix those problems, it proposes just two tax rates: a 15% flat tax on people earning up to about $168,000, and a 30% income tax on people earning above that, the documentIt also proposes eliminating “most deductions, credits and exclusions,” though the plan does not specify which would go away and which would remain.

“The federal income tax system is progressive, and people who make more money pay a higher marginal tax rate than people who make less money,” Brendan Duke, senior director of economic policy at the left-leaning Center for American Progress, told CBS MoneyWatch. “Conservatives look at that and think it's unfair to the wealthy to ask them to pay a larger share of their income in taxes than lower-income families.”

The Project 2025 proposal “is a dramatic overhaul of how we finance our government, asking the wealthy to pay more than lower-income families,” he said. “This shifts taxes from the wealthy to the middle class, period.”

The Heritage Foundation and Project 2025 did not immediately respond to a request for comment.

Tax Rates Project 2025

Millions of lower- and middle-class households would likely face significantly higher taxes under Project 2025's proposals.

He estimated that a middle-class family with two children and an annual income of $100,000 would pay an additional $2,600 in federal income taxes if they were faced with a 15% flat tax on their income because of the loss of the 10% and 12% tax brackets. If the child tax credit were also eliminated, they would pay an additional $6,600 compared to the current tax system, Duke said.

For comparison, a married couple with two children and an income of $5 million a year could enjoy a tax cut of $325,000, he estimates.

“That 15% bracket is a very important step in terms of raising taxes for middle-class families,” Duke said.

Millions of American households earning less than $168,000 would likely face higher taxes at a rate of 15 percent. Currently, the bottom half of American taxpayers, those earning less than $46,000 a year, pay a effective tax rate of 3.3% —which reflects their income tax after deductions, tax credits and other benefits.

Other fiscal and economic changes proposed by Project 2025:

  • Lowering the corporate tax rate from 21% to 18%, which was implemented in the Tax Cuts and Jobs Act of 2017. Before the TCJA, the corporate tax rate was 35%.
  • Lowering the capital gains tax to 15%. Currently, people with high incomes pay 20% tax on their capital gains.
  • Eliminating credits for green energy projects set up by the Inflation Reduction Act.
  • Consider introducing a US consumption tax, like a national sales tax.
  • Eliminating the Federal Reserve's mandate to maintain full employment in the labor market.

To be sure, overhauling the tax code would require lawmakers to approve changes to the tax code, which could be difficult if either the House or the Senate is controlled by the opposing party. Trump, for example, was able to get his Tax Cuts and Jobs Act passed by a Republican-led Congress even though no Democrats voted for the measure.

What does Trump say about Project 2025?

Trump has distanced himself from Project 2025, with his campaign presenting its own plans through “Agenda item 47While Trump has yet to propose any concrete tax plans, he has floated his proposal to create one. 10% tariff on all imports and a 60% tariff on Chinese imports, which could raise enough money to eliminate the federal income tax.

But tax experts say the math is wrong, because the money raised from new rates is nowhere near enough to replace the more than €100,000. 2 trillion dollars in individual income taxes collected each year by the IRS. Consumers are also likely to pay more in higher costs for imported consumer goods and services with tariffs added to them, experts note.

“A tariff is a consumption tax, and there is a continuous line between [Project 2025’s] “The tax reform and what Trump talked about, eliminating taxes in favor of a consumption tax,” Duke noted.

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