Project 2025 is a contentious set of policy proposals from the conservative think tank, The Heritage Foundation, intended for implementation should a Republican president assume office in 2025. Economists and tax experts argue that the 900-page manifesto’s proposed reforms to the U.S. tax system would exacerbate economic inequality.
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Proposed Tax Reforms: According to Project 2025’s “Mandate for Leadership” document, the authors’ goal is to “simplify the tax code.”
The document proposes changing the U.S. tax system by adopting two flat tax brackets. Individuals making over $168,000 a year would pay 30% in federal income tax. Individuals making under $168,000 a year would pay 15%. It would also eliminate most deductions, credits and exclusions.
Project 2025 also proposes lowering the corporate income tax from 21% to 18%. In 2017, former President Donald Trump lowered the rate from 35% to 21%, and, according to a Bloomberg interview, he wants to lower it further to 15% if elected in 2024.
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Why it Matters: Currently, the bottom 50% of Americans pay an average effective federal tax rate of 3.3% according to the Tax Foundation. This would likely rise under a new tax system. The poorest Americans already have higher tax incidence on regressive taxes such as sales or gasoline.
The U.S. currently has a graduated income tax system with seven brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The idea of a graduated tax system is to lower the tax incidence of people with a lower ability to pay and institute higher tax incidence for people with a greater ability to pay.
Brendan Duke, senior director at the left-leaning Center for American Progress, told CBS News that Project 2025’s tax plan would mean that a middle-class family with two children and an annual income of $100,000 would pay an estimated $2,600 in additional federal income tax due to the loss of the 10% and 12% tax brackets.
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Famed billionaire investor Warren Buffett has long advocated for higher tax rates for the wealthy. In May, Buffett said that no Americans would have to pay a federal income tax if corporations fulfilled their tax obligations.
William G. Gale, an expert at the non-partisan Tax Policy Center, wrote a blog post in March arguing for “a simpler and more progressive [graduated] system.” He also warned about the pitfalls of some ideas to simplify the tax system.
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“The problem is that simplifying the tax system cannot occur in a vacuum. The tax system did not get complicated by accident. The provisions in the code were all inserted for some purpose, whether to promote fairness, economic growth, social policy goals, or better tax compliance,” Gale wrote.
The Heritage Foundation spent $22 million to finance Project 2025, according to the New York Times. The University of Pennsylvania ranks it among the most influential think tanks in the U.S.
Trump states he “know [s] nothing” about Project 2025, although the initiative was spearheaded by several of his former officials and allies.
According to Snopes, the Coors and Walton families’ billion-dollar empires donated to the Heritage Foundation in the past.
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This article Project 2025 Wants To Radically Change US Tax Policy: Would You Pay More Or Less In Taxes? originally appeared on Benzinga.com
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Source: finance.yahoo.com