Project 2025, a comprehensive 900-page blueprint designed to overhaul the federal government, has been gaining significant attention for its proposed changes, especially in the U.S. tax code. The plan is drawing notice as President Biden and Democrats use it to highlight potential future changes if former President Donald Trump wins the upcoming election and reclaims the White House. The blueprint’s proposals span a wide range of economic and social issues, including tax reforms, abortion, and diversity, equity, and inclusion (DEI) topics.
The Heritage Foundation, a conservative think tank, oversees Project 2025. The project is led by two former Trump administration officials: Paul Dans, who serves as the project director and was previously the chief of staff at the Office of Personnel Management, and Spencer Chretien, the project’s associate director and a former special assistant to Trump. Despite its connections to former Trump officials, Trump himself has distanced himself from the project. On Truth Social, he stated that he is unfamiliar with the plan, instead promoting his own “Agenda 47,” which focuses more on social and political issues like homelessness and immigration rather than specific tax reforms.
One of the most notable aspects of Project 2025 is its proposed restructuring of the U.S. tax code. The current tax system features seven tax brackets ranging from 10% to 37%, designed to ensure that lower-income Americans pay a smaller share of their income in federal taxes compared to higher-income individuals. For example, under the current system, a married couple pays 10% in federal income tax on their first $23,200 of income, with higher rates applied to subsequent income brackets.
Project 2025 argues that the current tax system is overly complicated and expensive for taxpayers to navigate. To address these issues, it proposes a significant simplification: reducing the number of tax brackets to just two. Under this proposal, individuals earning up to approximately $168,000 would pay a 15% flat tax, while those earning above that threshold would face a 30% income tax. Additionally, the plan suggests eliminating most deductions, credits, and exclusions, although it does not specify which ones would be retained.
Critics of this proposal, such as Brendan Duke from the Center for American Progress, argue that this shift would disproportionately impact middle-class families by increasing their tax burden while providing significant tax cuts for the wealthy. For example, a middle-class family earning $100,000 annually with two children would pay an additional $2,600 in federal income tax under the proposed 15% flat tax, largely due to the elimination of lower tax brackets. If the Child Tax Credit were also eliminated, this family could face an additional $6,600 in taxes compared to the current system. Conversely, a wealthy couple earning $5 million a year would see a substantial tax cut of $325,000 under the new proposal.
In addition to the proposed changes to individual income taxes, Project 2025 includes several other significant tax and economic reforms:
- Corporate Tax Rate: The proposal suggests reducing the corporate tax rate from 21% to 18%. The current rate was established by the 2017 Tax Cuts and Jobs Act (TCJA), which reduced it from 35%.
- Capital Gains Tax: The plan proposes lowering the tax on capital gains for high-income earners from 20% to 15%.
- Green Energy Credits: The blueprint recommends eliminating credits for green energy projects established by the Inflation Reduction Act.
- Consumption Tax: The proposal considers introducing a national sales tax.
- Federal Reserve Mandate: Project 2025 suggests eliminating the Federal Reserve’s mandate to maintain full employment.
Implementing these changes would require legislative approval, which could be challenging if either the House or Senate is controlled by the opposing party. For example, Trump’s Tax Cuts and Jobs Act (TCJA) passed with a Republican-led Congress, despite receiving no Democratic support.
While Trump has not yet proposed specific tax plans, analysts expect that he would seek to extend the tax cuts enacted through the TCJA if re-elected. Many provisions of the TCJA, including lower tax brackets, are set to expire at the end of 2025. A likely scenario is that a re-elected Trump would work with Republican lawmakers to extend these tax cuts while potentially repealing clean energy and climate-related provisions from the Biden administration’s Inflation Reduction Act. To offset the reduction in tax revenue, they might also consider cutting spending on social benefits.
Trump has also suggested creating a 10% tariff on all imports and a 60% tariff on Chinese imports, claiming that this could raise enough revenue to eliminate the federal income tax. However, tax experts argue that the revenue from such tariffs would fall far short of replacing the more than $2 trillion collected annually in individual income taxes. Additionally, consumers would likely face higher prices for imported goods and services due to the tariffs.
Overall, Project 2025 presents a bold and sweeping vision for restructuring the U.S. tax code and other economic policies. While it aims to simplify the tax system, critics argue that it could significantly increase the tax burden on middle-class families while providing substantial tax cuts for the wealthy. As the debate over these proposals continues, their potential impact on millions of Americans remains a critical point of discussion.