A little-known proposal buried within Project 2025, a right-wing policy blueprint developed by the Heritage Foundation and co-authored by more than 100 former Trump administration staffers, could have devastating financial consequences for millions of American workers. While much of the attention on Project 2025 has focused on its more well-known proposals, such as slashing the corporate tax rate and reducing capital gains taxes, a lesser-known policy aimed at taxing non-wage benefits could significantly increase financial hardship for working families.
Project 2025 proposes taxing employers on any non-wage benefits that exceed $12,000 per worker annually. This policy, which has received little public attention, could impact health insurance, retirement plans, and other employer-provided benefits that many workers rely on. According to an analysis by EPI Action, a nonpartisan research and advocacy organization affiliated with the Economic Policy Institute, this proposal could affect more than 15 million workers, resulting in an additional $12 billion in taxes if employers reduce or eliminate these benefits.
Under current tax law, employers can deduct all wages and other employee benefits as business expenses when calculating their taxes. However, the Project 2025 proposal would no longer allow employers to deduct non-wage benefits that exceed $12,000 per worker annually. This change would likely lead employers to cut back on these benefits or shift compensation to taxable wages and salaries, thereby increasing the financial burden on workers.
Josh Bivens, chief economist for EPI Action, warned of the potential impact of this proposal in a recent analysis. “At best, employers would switch compensation away from tax-preferred benefits to taxable wages and salaries, increasing the taxes workers must pay. At worst, employers would simply cut back on benefits without offering an offsetting increase in wages and salaries,” Bivens wrote.
One of the most concerning aspects of this proposal is its potential impact on employer-sponsored health insurance, which is the dominant form of coverage in the United States. Over 150 million people receive health insurance through employer plans, and about two-thirds of non-wage benefits provided by employers are in the form of health insurance contributions. If employers are taxed on these benefits, they may be less likely to offer them, leaving millions of workers and their families without affordable health coverage.
Bivens highlighted the damaging effects this policy could have on families, particularly those that rely on a single breadwinner’s employer-provided health insurance to cover dependents. “If, for example, a two-earner household with young kids has one earner working part time to have more time for childcare, the part-time earner is highly unlikely to qualify for employer-provided insurance,” Bivens explained. “This family must rely on the full-time earner having access to a family health insurance plan. The Project 2025 plan would hence greatly increase hardship for such families.”
The proposal also includes a provision that would bar employers from deducting the cost of family health insurance plans that cover dependents over the age of 23. This appears to be a clear attempt to roll back one of the more popular parts of the Affordable Care Act (ACA), which allows children to remain on their parents’ health insurance plans until age 26. By targeting these benefits, Project 2025 seeks to undo protections that have been crucial for many American families, particularly in a time of rising healthcare costs.
The broader implications of this proposal are part of a long-standing conservative agenda to shift costs onto families as a way to control healthcare expenses. This approach is not new; it echoes previous efforts like the “Cadillac Tax,” an excise tax on expensive health insurance plans that was part of the ACA before being repealed in 2019. Conservative policymakers have consistently pushed for reducing the generosity of health insurance plans and unraveling employer-provided benefits, leaving workers to bear a greater share of healthcare costs.
The Republican Study Committee, the largest conservative caucus in the U.S. House of Representatives, has also called for taxing employer-provided benefits in its budget proposal earlier this year. This alignment of policy ideas across conservative organizations highlights that the push to tax non-wage benefits is not an idiosyncratic feature of Project 2025 but a central goal of the conservative policy-making ecosystem.
Despite attempts by Trump and his running mate, Senator JD Vance, to distance themselves from Project 2025, recent reports indicate that the Trump campaign has expressed enthusiastic approval of its direction in meetings with the Heritage Foundation. As Common Dreams reported, Trump flew on a private jet with Heritage Foundation president Kevin Roberts in 2022, further signaling the close ties between the campaign and the policy blueprint.
“The candidates can claim Project 2025 has no influence on them, but organized conservative constituencies for the corporate class got everything they wanted in the first Trump administration,” Bivens noted. “There’s no reason to expect this time to be different.”
The potential impact of this proposal on American workers is alarming. If implemented, it would erode access to key family-sustaining benefits, such as health insurance, and force workers to pay higher taxes on compensation that was previously tax-free. This shift would disproportionately affect middle- and lower-income families, exacerbating economic inequality and leaving millions of Americans more vulnerable to financial instability.
As the debate over Project 2025 continues, it is crucial for workers, advocates, and policymakers to scrutinize these proposals and push back against policies that threaten the economic security of working families. The risks are clear, and the stakes could not be higher.
In Josh Bivens’s words: “Whatever its source, the outcome of the Project 2025 plan to tax employee benefits is clear: U.S. workers will lose access to key family-sustaining benefits and face higher taxes.”
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