As former President Donald Trump secures the Republican presidential nomination, both political parties are eyeing Project 2025, a multi-pronged policy plan created by conservative think tank The Heritage Foundation as a collective effort with more than 100 other right-leaning organizations. If enacted, the plan could overhaul the U.S. income tax system and revamp the IRS, among other changes. The roughly 900-page “Mandate for Leadership” calls for sweeping changes to the federal government and policy recommendations for the next administration. The plan was launched in 2022 and published in April 2023.
President Joe Biden and Democrats have framed the initiative as a preview of a second term from Trump, even though Trump has distanced himself from the mandate. Trump has stated that he knows nothing about Project 2025 and has not seen it. However, several former Trump officials have been directly affiliated with the project, and Trump praised The Heritage Foundation in April 2022.
Project 2025 aims to “promote prosperity” by reducing marginal tax rates, lowering the cost of capital, and broadening the tax base. The plan includes a “simple two-rate individual tax system” with flat rates of 15% and 30%. The higher tier would start around the Social Security wage base. The plan would also eliminate “most deductions, credits, and exclusions,” including tax breaks for state and local taxes and education. Additionally, it proposes lower taxes on investments for higher earners with capital gains and qualified dividends levied at 15%.
Implications for Taxes
Under the Project 2025 proposal, individuals could pay more or less in federal income taxes, depending on their current bracket. The plan also includes some type of consumption tax, levied on goods and services, such as a national sales tax. However, these policies could be challenging to get enacted in Congress. The proposal also aims to make the estate and gift tax exemptions enacted via the TCJA permanent and reduce the estate and gift tax rate to a maximum of 20%.
IRS Reform
Project 2025 also proposes changes to “reduce the intrusiveness and increase the accountability” of the IRS. The plan calls for agency budget cuts, higher resources for the Office of the Taxpayer Advocate, and a “serious review” of information reporting. These changes could have direct impacts on taxpayers, as the agency has faced increased scrutiny from Republicans.
Overall, Project 2025 is a comprehensive policy plan that aims to reform the U.S. income tax system, revamp the IRS, and promote prosperity through various changes. While the plan has received mixed reactions from political parties and key figures, its implications for taxes and the IRS could have far-reaching effects on taxpayers and the overall economy. As the debate on these proposed policies continues, it remains to be seen how and when they will be implemented.