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Project 2025 is designed to fundamentally reform the U.S. tax system. Here’s how it could affect you.


What are the goals of “Project 2025”?

Project 2025, a 900-page plan for the next Republican president, is attracting attention with its proposals to restructure the federal government. Among the changes is a comprehensive restructuring of the U.S. tax code.

President Biden and Democrats have pointed to Project 2025 in recent weeks to outline what could be in store if former President Donald Trump wins the election in November and retakes the White House in January. Many of the plan’s proposals touch on economic issues that could affect millions of Americans, as well as social issues such as abortion and issues like diversity, equity and inclusion, or DEI.

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

Project 2025’s tax proposals, if implemented, would likely affect every adult in the U.S. by throwing out the long-standing system of multiple tax brackets designed to help low-income Americans pay a smaller share of their income in federal taxes compared to middle- or high-income workers.

There are currently seven tax brackets — 10%, 12%, 22%, 24%, 32%, 35% and 37% — each based on income limits. For example, a married couple pays 10% federal income tax on the first $23,200 of income, then 12% on income between $23,201 and $94,300, and so on. Married couples must earn over $487,450 this year to reach the top tax rate of 37%.

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

“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 see that and think it’s unfair to the rich to ask them to pay a larger share of their income in taxes than lower-income families.”

Project 2025’s proposal is “a dramatic reform of how our government is financed, where we ask the rich to give more than low-income families,” he said. “This will shift taxes from the rich to the middle class, period.”

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

Tax rates of the 2025 project

For millions of lower and middle class households, Project 2025’s proposals would likely result in significantly higher taxes.

He estimated that a middle-class family with two children and an annual income of $100,000 would pay $2,600 more in federal income tax if they had to pay a flat 15 percent tax on their income due to the elimination of the 10 and 12 percent tax brackets. If the child tax credit were also eliminated, they would pay $6,600 more compared to today’s tax system, Duke said.

By comparison, a married couple with two children and an annual income of $5 million would be happy with a tax reduction of $325,000, he estimated.

“This 15 percent tax rate represents a huge tax increase for middle-class families,” Duke said.

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

Other tax and economic changes proposed by Project 2025 include:

  • Reduction of the corporate tax rate from the current 21% to 18%, implemented by the Tax Cuts and Jobs Act of 2017. Before the TCJA, the corporate tax rate was 35%.
  • Reduction of capital gains tax to 15%. High earners currently pay a tax of 20% on their capital gains.
  • Abolition of the loans for green energy projects created by the Inflation Reduction Act.
  • Consideration of the introduction of a US consumption tax, such as a national sales tax.
  • Eliminate the Federal Reserve’s mandate to maintain full employment in the labor market.

Of course, reforming the tax system would require approving changes to the tax code, which could be difficult if the House or Senate is controlled by the opposing party. For example, Trump was able to get his Tax Cuts and Jobs Act passed by a Republican-dominated Congress even though not a single Democrat voted for the measure.

What does Trump say about Project 2025?

Trump has distanced himself from Project 2025, and his campaign team is proposing its own plans with “Agenda 47.” Although Trump has not yet presented any concrete tax plans, he has put forward his proposal to create a 10% tariff on all imports and a 60 percent tariff on Chinese imports that could raise enough money to eliminate the federal income tax.

But tax experts say that math doesn’t add up because the revenue from new tariffs wouldn’t be nearly enough to replace the more than $2 trillion in income taxes the IRS collects each year. And consumers will likely have to pay more because the tariffs will be added to imported consumer goods and services, experts say.

“A tariff is a consumption tax, and there is a common thread between (Project 2025) tax reform and what Trump has talked about, which is eliminating taxes in favor of a consumption tax,” Duke noted.

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