Project 2025 has been an important talking point in the run-up to the 2024 presidential election. Although neither of the two main parties has an official manifesto, the 900-page order is considered a possible blueprint for a “conservative” administration.
Inspired by a Washington DC-based conservative think tank Heritage FoundationThe An Anthology of Policy Thoughts Covers major issues in the presidential race, with taxes featuring heavily.
While the former president Donald Trump has insisted on numerous occasions Nor does it have any connection with the manifestoThe Heritage Foundation presents itself as “agenda driven and the right people in place”. Ready to take up this agenda on day one of the next conservative administration“Which Trump will lead if he wins the November election.
“I don’t know anything about Project 2025. I have not seen it, have no idea who is in charge of it, and, quite the contrary, we have received Republicans The platform, it had nothing to do with it,” Trump wrote On Satya Social in July.
The conservative group said it would be up to the next president to decide what, if any, of Project 2025’s recommendations they would implement, adding: “As we have been saying for more than two years, Project 2025 Not speaking for any candidate or campaign“
Newsweek The 900-page order breaks down the major tax changes proposed—and how they might affect Americans.
Two tax brackets
There are currently seven tax breaks in the US based on income thresholds – 10, 12, 22, 24, 32, 35 and 37 percent. But Project 2025 proposes a flat tax of 15 percent for those earning up to $168,000 and a 30 percent income tax for those earning above — a significant simplification of the US tax code.
Some experts have argued that creating a two-tier tax system would have little benefit, said Mark Luscombe, principal analyst at Walters Kluwer Tax & Accounting in North America. Newsweek It will make them “less progressive and more regressive”.
“For example, assuming the $168,000 figure is the taxable income figure for single filers, the change would increase the tax on people in the current 10 percent bracket and raise the tax to the 12 percent bracket for single filers with taxable income up to $47,150 in 2024,” it said, adding that “from $168,000 to $191,950 Current 24 percent tax bracket with taxable income.”
However, Luscombe explained that there would be less tax to pay for others. “It would cut taxes for single filers in the current 22 percent tax bracket for taxable income from $47,151 to $100,525,” he continued, as well as cut taxes for single filers in the current 24 percent tax bracket with taxable income from $100,526 to $168,000. It will also reduce the tax of single filers with current taxable income in the 32 percent, 35 percent and 37 percent tax brackets.
Cut corporation tax
Another proposal presented in the 900-page document is a further reduction in the corporate tax rate from 21 percent to 18 percent. Trump lowered the rate as part of the 2017 Tax Cuts and Jobs Act (TJCA). Before the TCJA, the corporate tax rate was 35 percent.
“While lowering the corporate tax rate to 18 percent is intended to spur investment and economic growth, the actual impact may be quite different,” said Alexander Cabot, president and CEO of The Cabot Company, a Chicago-based tax compliance firm. Newsweek. He warned that it could “lead to a significant reduction in government revenue, creating a gap that must be filled by cutting essential services or increasing the tax burden on other sections of the population.”
This would be exacerbated if combined with the proposed lower rate on capital gains and qualified dividends, Cabot explained.
Cabot also said that lowering corporation tax rates “operates on the assumption that lowering corporate taxes will automatically lead to significant new investment and economic growth,” an assumption that is not guaranteed.
“Companies do not necessarily use additional capital for expansion or job creation. Instead, they may prioritize short-term financial strategies that do not contribute to long-term economic growth,” he explained. “Immediate spending on capital expenditures, while potentially beneficial in some cases, may also encourage investments that are not necessary. that is aligned with productive or long-term business growth.”
Luscombe said that lowering the corporate tax rate could have several benefits, including “helping US corporations compete in international markets with foreign companies under favorable tax regimes” as well as “reducing the share of corporate tax costs passed on to shareholders and consumers.”
Despite this, Luscombe agreed that it would still add to the growing US deficit.
Reduce capital gains tax
Project 2025 also covers taxes levied on sale of assets, proposing to reduce the capital gains tax rate to 15 percent and index it to inflation.
While such a change would mainly affect high earners, Luscombe says that “lower capital gains tax rates than ordinary income tax rates are often justified by the fact that capital gains tax falls on assets that have increased in value due to inflation over time. True in value Increase,” Luscombe said.
Although only two to five percent of Americans rely on capital gains and dividends as their primary income, “these forms of income contribute 10 to 15 percent of total tax revenue,” Cabot said.
“Reducing their tax rates could reduce revenue by five to 10 percent, shifting the tax burden to the wealthier and other taxpayers,” he explained.
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