Key Tax Proposals Under Project 2025

As President Donald Trump embarks on his second term, his administration is advancing a series of tax policy initiatives that could significantly reshape the U.S. tax system. Central to these efforts is "Project 2025," a comprehensive blueprint developed by the Heritage Foundation and other conservative organizations, aiming to overhaul federal governance and economic policy.​

Key Tax Proposals Under Project 2025

1. Simplified Tax Brackets: Project 2025 proposes consolidating the current seven federal income tax brackets into two: a 15% rate for incomes up to $168,600 and a 30% rate for incomes above that threshold. This change would eliminate most deductions and credits, potentially increasing the tax burden for middle-income households.

2. Extension of the 2017 Tax Cuts: The administration seeks to make permanent the provisions of the Tax Cuts and Jobs Act (TCJA) of 2017, which are set to expire at the end of 2025. This includes maintaining reduced corporate tax rates and individual income tax cuts.

3. Elimination of Certain Taxes: Trump's plan includes eliminating federal income taxes on Social Security benefits, tips, and overtime pay. While aimed at providing relief to working-class Americans, critics argue that these measures could disproportionately benefit higher earners who can reclassify income to fit these categories.

4. Corporate Tax Adjustments: While the corporate tax rate was reduced from 35% to 21% under the TCJA, discussions are ongoing about further adjustments. As of mid-April 2025, no decision has been made regarding a potential increase or decrease in the corporate tax rate.

 Implications for Taxpayers

Analyses suggest that the proposed tax reforms could lead to increased tax liabilities for middle-income families. For instance, a typical family of four earning $100,000 annually might see a tax increase of approximately $2,600 due to the consolidation of tax brackets and elimination of certain deductions.

Conversely, high-income individuals and corporations are poised to benefit from the proposed changes, including lower tax rates on capital gains and the potential for reduced corporate tax obligations.​

Fiscal Considerations

The proposed tax cuts and reforms are expected to have significant implications for the federal budget. Estimates indicate that these measures could increase the federal deficit by $5 trillion to $11 trillion over the next decade if not offset by spending cuts or increased revenues.

To address potential revenue shortfalls, the administration has suggested measures such as increasing tariffs on imports and reducing federal spending in various areas. However, economists warn that such strategies may not fully compensate for the loss in tax revenue and could have broader economic repercussions.

Legislative Outlook

Efforts are underway to pass the proposed tax reforms through Congress. The administration aims to utilize budget reconciliation processes to advance the legislation, with the goal of enacting the changes by the summer of 2025. However, debates persist within the Republican Party regarding the specifics of the proposals, and the outcome remains uncertain.​

President Trump's tax policy initiatives, as outlined in Project 2025, represent a significant shift in the U.S. tax landscape. While aiming to simplify the tax code and stimulate economic growth, these proposals also raise concerns about fiscal sustainability and the equitable distribution of tax burdens. As legislative deliberations continue, taxpayers and policymakers alike will be closely monitoring the developments and their potential impacts.​