As someone who closely follows tax policies and their impact on everyday Americans, I can’t help but feel concerned about the latest developments surrounding Project 2025. This so-called “Mandate for Leadership” has laid out a tax plan that could drastically shift the financial burden onto middle-class families while handing out tax breaks to the wealthy and large corporations.
Under Project 2025’s “intermediate tax reform,” we’re looking at changes to tax brackets that would see middle-income households shouldering more of the tax load. And it doesn’t stop there. The “fundamental tax reform” proposed in the plan would completely overhaul our current tax system by replacing individual income and corporate taxes with consumption taxes. This could disproportionately hurt those who spend a larger share of their income on everyday necessities.
This blog will dive into how these changes could affect us, so stay tuned as we explore what this means for our wallets and future.
How Project 2025’s Tax Reform Could Cost a Typical Family of Four $3,000 More?
When I dug into the details of Project 2025’s tax plan, I was struck by how their proposed “intermediate tax reform” could lead to a significant tax increase for many families. The plan’s main feature is the consolidation of our current seven individual income tax brackets—ranging from 10 per cent to 37 per cent—down to just two: 15 per cent and 30 per cent.
While Project 2025 claims this will “simplify the tax code,” I find that argument a bit misleading. The number of tax brackets is already one of the easiest parts of the tax code to deal with, especially with modern tax software that calculates what’s owed in seconds. What’s more, most taxpayers already fall into the first two brackets, which means they’re essentially living with a two-bracket system as it is.
The reality is that this change could end up costing a typical family of four an extra $3,000 in taxes each year.
Project 2025’s New Tax Bracket System: Will It Hit Middle-Income Families Harder?
When I first looked at Project 2025’s new tax bracket system, it was clear that it could drastically shift the tax burden onto middle-income families while easing it for the wealthy. The current tax system has two lower brackets—10 per cent and 12 per cent—that help ease the load for many households. However, under Project 2025, these brackets will be replaced by a higher 15 percent bracket. This means that married couples earning between $30,000 and $120,000 and single filers making between $15,000 and $60,000 would see their tax rates go up.
On the flip side, higher-income earners would benefit from a proposed 30 per cent tax bracket, which is lower than the current 32 per cent, 35 per cent, and 37 per cent brackets that apply to much of their income.
The result?
Middle-class families could face significant tax increases, with a typical family of four earning around $110,000 in 2022 likely to see about a $3,000 tax hike.
To make matters worse, Project 2025 also plans to cut back on many deductions, credits, and exclusions. While we don’t yet know exactly which ones would be eliminated if key provisions like the child tax credit or earned income tax credit are on the chopping block, the financial strain on low- and middle-income families could be even greater.
This change could impact families across all 50 states, leaving many with higher tax bills and fewer options to offset them.
How Project 2025’s Tax Changes Favor the Wealthy and Billionaires, Leaving Middle-Class Families Behind
Project 2025 continues to tilt the scales in favour of the wealthiest households, particularly those making over $10 million a year. One of the key proposals is to reduce taxes on capital gains and qualified dividends to just 15 per cent. This change primarily benefits the top 2 per cent of earners—those making more than $500,000 annually—since anyone earning less than that already pays either 0 or 15 per cent on these types of income.
But the benefits for the wealthy don’t stop there. The plan also proposes eliminating the net investment income tax, which is currently a 3.8 per cent tax on capital gains, dividends, and other investment income for households earning more than $200,000.
When you combine the proposed tax bracket changes, the reduced rates on capital gains and dividends, and the removal of the net investment income tax, the result is staggering. For the 45,000 households making more than $10 million annually, these changes could mean an average tax cut of up to $2.4 million. Even if some deductions were eliminated, they’d still see a significant tax break, averaging around $1.5 million.
This shift in tax policy raises important questions about fairness and the impact on middle-class families, who would be left to pick up the tab.
How Project 2025’s Tax Plan Could Hand Massive Cuts to Big Corporations
Project 2025 isn’t just about giving wealthy individuals a break—it also includes a major tax cut for big corporations. This plan takes the 2017 tax reform’s already huge cut in corporate tax rates and makes it even bigger. The proposal suggests lowering the corporate tax rate from 21 percent to 18 percent, which would translate to a massive $24 billion tax cut for the top 100 companies in the U.S.
Here’s a look at who stands to gain:
- $1.3 billion for the top five oil giants: Exxon Mobil, Chevron, Marathon Petroleum/ConocoPhillips, Phillips 66, and Valero Energy.
- $1.6 billion for the leading drug companies: Johnson & Johnson, Merck, Pfizer, AbbVie, and Bristol Myers Squibb.
- $2.1 billion for the top five Wall Street banks: JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs.
- $800 million for the biggest grocery chains: Kroger, Costco, Albertsons, Target, and Walmart.
On top of this, Project 2025 plans to further reduce corporate taxes by rolling back recent tax increases, such as the 15 per cent minimum tax for large corporations and the excise tax on stock buybacks.
Final Thoughts
Project 2025’s tax plans signal a dramatic shift in how taxes are levied, with substantial increases for middle-class families and significant cuts for the wealthy and big corporations. By consolidating tax brackets and replacing income taxes with consumption taxes, the burden on average earners could rise, potentially costing a typical family of four an extra $3,000 annually.
Meanwhile, billionaires and large corporations stand to benefit from lower rates and fewer tax liabilities. As we continue to explore these changes, it’s crucial to understand their implications and advocate for a tax system that supports fairness and equity.
Frequently Asked Questions
Ques. 1. What is Project 2025 and how does it affect taxes?
Answer: Project 2025 is a policy initiative aimed at overhauling the U.S. tax system, primarily benefiting the wealthy and large corporations. It proposes consolidating tax brackets, increasing the burden on middle-class families, and replacing income taxes with consumption taxes, which could significantly impact those who spend more on everyday necessities.
Ques. 2. How will Project 2025 impact middle-class taxpayers?
Answer: Project 2025 is expected to raise taxes for middle-class taxpayers by consolidating the lower tax brackets and reducing deductions, credits, and exclusions. A typical family of four could see their tax bill increase by up to $3,000 annually due to these changes.
Ques. 3. Who benefits most from Project 2025’s tax plan?
Answer: The primary beneficiaries of Project 2025’s tax plan are wealthy individuals and large corporations. The plan reduces taxes on capital gains, qualified dividends, and corporate profits, resulting in substantial tax breaks for high-income earners and big businesses.
Ques. 4. What changes does Project 2025 propose for corporate taxes?
Answer: Project 2025 proposes reducing the corporate tax rate from 21% to 18%, further benefiting large corporations. This change would result in significant tax savings for major companies, particularly in the oil, pharmaceutical, banking, and retail sectors.
Ques. 5. How does Project 2025 compare to the Tax Reform Act of 1986?
Answer: While the Tax Reform Act of 1986 aimed to simplify the tax code and reduce tax rates across the board, Project 2025 focuses more on benefiting the wealthy and corporations. The 1986 reform broadened the tax base, whereas Project 2025 narrows it, leading to increased tax burdens on middle-class families.
Ques. 6. What is the potential impact of Project 2025 on consumption taxes?
Answer: Project 2025 proposes replacing individual income and corporate taxes with consumption taxes. This shift could disproportionately affect middle and lower-income households, as they tend to spend a larger portion of their income on goods and services, leading to higher overall tax burdens.
Ques. 7. How does Project 2025 affect capital gains and dividends?
Answer: Project 2025 proposes reducing taxes on capital gains and qualified dividends to just 15%, which primarily benefits the wealthiest taxpayers. The plan also suggests eliminating the net investment income tax, further reducing tax liabilities for high-income earners.
Ques. 8. Will Project 2025 eliminate any tax deductions or credits?
Answer: Yes, Project 2025 plans to eliminate several tax deductions, credits, and exclusions, which could significantly impact middle-class taxpayers. While the specifics are not fully detailed, potential cuts to the child tax credit or earned income tax credit would exacerbate the financial strain on these families.
Ques. 9. What is the rationale behind Project 2025’s tax reforms?
Answer: The proponents of Project 2025 argue that the tax reforms will simplify the tax code and promote economic growth. However, critics point out that the changes primarily benefit the wealthy and corporations, while increasing the tax burden on middle and lower-income households.
Ques. 10. How will Project 2025 impact the U.S. economy?
Answer: The impact of Project 2025 on the U.S. economy is debated. While some argue that tax cuts for the wealthy and corporations could stimulate investment and growth, others believe that the increased tax burden on middle-class families could reduce consumer spending and widen income inequality.
Also Read:
Project 2025 Tax Plan: What It Means for Individuals and Businesses
Project 2025: What to Expect for Your Tax Bracket and Capital Gains in Trump’s Second Term
Project 2025: How It Will Impact Your Wallet and Financial Future