Project 2025, Chapter 22: All Our Axes Are Used on Taxes
(This is the 14th in a series of AI-generated analyses of the right-wing manifesto “Project 2025: Mandate for Leadership, the Conservative Promise.“ Some chapters are reviewed out of order. Comments in italics are mine)
Project 2025’s blueprint for the Treasury Department under a potential future Republican administration proposes a radical shift in economic policy. Its ambitious goals and far-reaching proposals, aimed at fostering economic growth and reducing regulatory burdens, hold significant implications for the average taxpayer and minority groups.
The heart of Project 2025’s Treasury plan lies in tax reform, with a focus on reducing marginal tax rates, minimizing the cost of capital, and simplifying the tax code. The proposed two-rate individual tax system (15% and 30%) and a reduction in the corporate income tax to 18% are aimed at stimulating investment and job creation.
For the average taxpayer, these changes could translate to lower tax bills and increased disposable income. However, the elimination of most deductions, credits, and exclusions raises concerns for those who benefit from these provisions, such as homeowners deducting mortgage interest or families claiming child tax credits.
Minorities, who often have lower incomes and rely on tax credits like the Earned Income Tax Credit, might be disproportionately affected by the elimination of these provisions. While the project envisions a simplified tax code reducing compliance costs, the potential loss of these crucial credits could offset any benefits from lower tax rates.
Universal Savings Accounts: A Mixed Bag
The proposal for Universal Savings Accounts (USAs) aims to incentivize savings and investment, offering tax-free growth and withdrawals for various purposes. This could benefit individuals across income levels, including minorities, by promoting financial security and wealth accumulation.
However, the potential for higher-income earners to disproportionately benefit from the $15,000 annual contribution limit (adjusted for inflation) raises concerns about exacerbating wealth inequality. The impact on lower-income individuals and minorities, who may struggle to contribute the maximum amount, remains uncertain.
Impact on Minorities and Low-Income Communities
The proposed elimination of the “equity agenda” and initiatives focused on racial equity raises concerns about the potential adverse impact on minority communities. These initiatives were designed to address systemic inequalities in access to financial services and economic opportunity. Their removal could disproportionately harm minorities and low-income individuals, who often face greater barriers to financial inclusion.
Furthermore, the rollback of consumer protection regulations could leave vulnerable populations more susceptible to predatory financial practices. For instance, the elimination of the Consumer Financial Protection Bureau (CFPB), as advocated by some Project 2025 contributors, could weaken safeguards against discriminatory lending and other abusive practices.
How the Ultra-Wealthy Could Benefit
- Reduced Corporate Income Tax Rate: A reduction in the corporate income tax rate from 21% to 18% could significantly benefit wealthy individuals who own businesses or have substantial investments in corporate stocks.
- Reduced Tax on Capital Gains and Dividends: The proposal to tax capital gains and dividends at 15% (down from the current top rate of 20%) would significantly benefit high-income earners who derive a large portion of their income from investments.
- Changes to Estate Tax: Reducing the estate tax rate to 20% and increasing the exemption amount would primarily benefit ultra-wealthy individuals who would otherwise face a substantial estate tax liability.
- Repeal of the Net Investment Income Surtax: This would be a direct tax cut for high-income earners who have significant investment income.
International Engagement: A Retreat from Global Leadership
The proposed withdrawal from international organizations like the OECD and the IMF, along with the termination of U.S. financial contributions, signals a retreat from global leadership. While these organizations have their flaws, they play a crucial role in promoting international cooperation on economic and financial issues. The U.S. withdrawal could undermine global efforts to address challenges like climate change, financial instability, and poverty.
Conclusion
Project 2025’s Treasury Department proposals represent a bold and controversial agenda. While some reforms could simplify the tax code, encourage entrepreneurship, and reduce regulatory burdens, others raise concerns about fairness, financial stability, and the potential for exacerbating existing inequalities.
The impact on the average taxpayer and minorities would be mixed. Some taxpayers could benefit from lower tax rates and simplified rules, while others could face higher tax burdens due to the elimination of deductions. The dismantling of equity initiatives and consumer protection regulations could disproportionately harm minorities and low-income communities.
Ultimately, the success or failure of these proposals would depend on their implementation and the broader economic and political context. Careful consideration and robust debate are essential to ensure that any reforms promote economic growth and opportunity for all Americans, not just the privileged few.
Scary Quote
“To reduce this tax bias against wages (as opposed to employee benefits), the next Administration should set a meaningful cap (no higher than $12,000 per year per full-time equivalent employee—and preferably lower) on untaxed benefits that employers can claim as deductions.” (Will employers reduce benefits like health insurance or retirement contributions to avoid exceeding the cap, potentially leaving employees with less financial security?)
Misleading Quote
“In 2022, the average American’s 401(k) plan dropped in value from $130,700 to $103,900—more than 20 percent.” (The documents uses the low point of the Dow under Biden, which would be comparable to using Trump’s Dow performance in the low point of the pandemic. Overall, the Dow has grown more than 40 percent since the day Biden was elected.)
About the Authors
Stephen Moore, one of the authors of this chapter, has called white males “the oppressed minorities on college campuses;” he argued against equal pay for women in sports and other fields; he wrote that Black women are replacing men with “welfare checks,” and on and on. His nomination by Trump for the Fed’s board of governors was withdrawn after his writings were revealed. William L. Walton, the founder and chairman of Rappahannock Ventures LLC, a private equity firm, and David Burton, a Senior Fellow of Economic Policy at Heritage Foundation, are co-authors.
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