Project 2025 has been a significant talking point in the run-up to the 2024 presidential election. While not an official manifesto of either of the two main parties, the 900-page mandate has been touted as a potential blueprint for a “conservative” administration.
Speared by Washington DC-based conservative think tank The Heritage Foundation, the anthology of policy ideas covers the key issues at play in the presidential race, with taxes featuring heavily.
While former president Donald Trump has insisted on numerous occasions that he has no affiliation with the manifesto, the Heritage Foundation posits itself as a “governing agenda and the right people in place, ready to carry this agenda out on day one of the next conservative administration,” which would be headed by Trump if he triumphs in November’s election.
“I know nothing about Project 2025. I have not seen it, have no idea who is in charge of it, and, unlike our very well received Republican Platform, had nothing to do with it,” Trump wrote on Truth Social in July.
The conservative group said it will be up to the next president to decide which, if any, recommendations from Project 2025 they may implement, adding: “As we’ve been saying for more than two years now, Project 2025 does not speak for any candidate or campaign.”
Newsweek has broken down the main tax changes proposed—and how they could affect Americans—in the 900-page mandate.
Photo-illustration by Newsweek/Getty
Two Tax Brackets
There are currently seven tax breaks in the U.S. based on income thresholds – 10, 12, 22, 24, 32, 35 and 37 percent. But Project 2025 proposes a 15 percent flat tax for those earning up to $168,000, and a 30 percent income tax for those earning above—a considerable simplification of the U.S. tax code.
Some experts have argued there will be little benefit to creating a two-tier tax system, with Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting in North America, telling Newsweek it would make them “less progressive and more regressive.”
“For example, assuming the $168,000 figure is a taxable income figure for single filers, the change would raise taxes on people in the current 10 percent bracket and 12 percent bracket for single filers with taxable incomes up to $47,150 in 2024,” as well as those “the current 24 percent tax bracket with taxable incomes from $168,000 to $191,950.”
However, Luscombe explained that for others there would be less tax to pay. “It would lower taxes for single filers in the current 22 percent tax bracket for taxable incomes from $47,151 to $100,525,” he continued, as well as decreased taxes for single filers in the current 24 percent tax bracket with taxable incomes from $100,526 to $168,000. It would also lower taxes of single filers with current taxable incomes in the 32 percent, 35 percent, and 37 percent tax brackets.
Cutting Corporation Tax
Another proposal floated in the 900-page document is a further reduction in the corporate tax rate to 18 percent from 21 percent. Trump lowered the rate as part of the 2017 Tax Cuts and Jobs Act (TJCA). Prior to 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,” Alexander Cabot, president and CEO of The Cabot Company, a Chicago-based tax compliance firm, told Newsweek. He warned it could “lead to a significant decrease in government revenue, creating a gap that must be filled either by cutting essential services or increasing the tax burden on other segments of the population.”
This would be exacerbated further if combined with a proposed lower rate on capital gains and qualified dividends, Cabot explained.
Cabot also said that dropping corporation tax rates “operates on the assumption that lowering corporate taxes will automatically lead to substantial new investments and economic growth,” an assumption that is not guaranteed.
“Companies may not necessarily use the 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 expensing for capital expenditures, while potentially beneficial in some cases, could also encourage investments that are not necessarily productive or aligned with long-term business growth.”
Luscombe said decreasing the corporate tax rate may have some benefits, including helping “U.S. corporations competing in the international markets with foreign companies under favorable tax regimes,” as well as lowering the share of “costs of corporate taxes passed down to shareholders and customers.”
Despite this, Luscombe agreed that it would still add to the growing U.S. deficit.
Reducing Capital Gains Tax
Taxes levied on the sale of assets are also covered in Project 2025, which proposes reducing the capital gains tax rate to 15 percent and indexing it to inflation.
Such a change would predominately affect higher earners, with Luscombe saying that “having capital gains tax rates lower than ordinary income tax rates is often justified on the basis that capital gains taxes fall on assets that have appreciated in value due to inflation over time rather than a true increase in value,” Luscombe said.
However, Cabot said while 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.”
“Reducing their tax rates could lead to a five to 10 percent drop in revenue, further shifting the tax burden away from the wealthy and onto other taxpayers,” he explained.
