The far-right agenda known as Project 2025 proposes radical changes to the U.S. tax code that would disproportionately burden middle-income Americans while granting significant tax breaks to the wealthiest households and large corporations. The tax reforms outlined in Project 2025, a manifesto produced by right-wing groups including the Heritage Foundation, aim to reshape American economic policy by shifting the tax burden away from the rich and toward middle- and low-income households.
Project 2025’s tax reform plan is divided into two phases: an immediate “intermediate tax reform” and a more drastic “fundamental tax reform” that would be implemented in the long term. Both phases present significant concerns for the financial well-being of middle-class Americans and the overall fairness of the U.S. tax system.
The centerpiece of Project 2025’s intermediate tax reform is the consolidation of the current seven individual income tax brackets into just two brackets: 15 percent and 30 percent. While this is framed as an effort to “simplify the tax code,” the reality is that this change would shift the tax burden away from wealthy individuals and onto middle-income earners.
Currently, the U.S. tax system features a progressive structure with seven tax brackets, ranging from 10 percent to 37 percent, which taxes higher incomes at higher rates. Project 2025’s proposal would replace this structure with a two-bracket system, ostensibly to make the tax code simpler. However, the number of tax brackets is already one of the simplest parts of the tax code, especially since tax-filing software automatically calculates the appropriate tax for each bracket.
Under the proposed two-bracket system, many middle-income families would face a significant tax increase. For example, a median family of four earning $110,000 annually would see their taxes rise by approximately $3,000. Similarly, a single-person household earning $40,000 would experience a $950 tax increase. This shift occurs because the lowest two tax brackets under the current system, 10 percent and 12 percent, would be replaced with a higher 15 percent rate. This change would effectively increase the tax rate on incomes between $30,000 and $120,000 for married couples, and between $15,000 and $60,000 for single filers.
Project 2025’s tax plan also proposes the elimination of most deductions, credits, and exclusions. While the specifics of which tax provisions would be eliminated remain unclear, the removal of credits such as the child tax credit and the earned income tax credit would likely exacerbate the financial strain on low- and middle-income households. These changes underscore the regressive nature of the tax reforms, which would shift the tax burden away from the wealthy and onto those who can least afford it.
While middle-class Americans would face higher taxes under Project 2025, the wealthiest households and large corporations would enjoy substantial tax cuts. The plan includes a proposal to tax capital gains and qualified dividends at a flat rate of 15 percent, a move that would exclusively benefit households earning more than $500,000 annually. Additionally, the plan calls for the elimination of the net investment income tax, a 3.8 percent tax on capital gains, dividends, and other investment income for households earning more than $200,000.
Combining these changes with the new tax brackets would deliver an average tax cut of $1.5 to $2.4 million for the 45,000 U.S. households earning more than $10 million annually. Even if all itemized deductions were eliminated for these wealthy households, they would still receive a significant tax cut, highlighting the skewed benefits of Project 2025’s tax reforms.
The corporate sector would also see substantial benefits from Project 2025’s tax plan. The proposal to cut the corporate tax rate from 21 percent to 18 percent would result in a $24 billion tax cut for the Fortune 100 companies, according to analysis by the Center for American Progress (CAP). This includes a $1.3 billion tax cut for the largest U.S. oil companies, $1.6 billion for major pharmaceutical companies, and $2.1 billion for top Wall Street banks. Additionally, the plan would repeal the corporate tax increases instituted by the Inflation Reduction Act, including the 15 percent minimum corporate tax rate and the excise tax on stock buybacks.
Project 2025’s tax reforms don’t stop at restructuring income and corporate taxes. The long-term goal of the plan is to replace individual and corporate income taxes entirely with a national consumption tax, which could take the form of a value-added tax (VAT) or a national sales tax. This shift would represent an even more significant burden on middle- and low-income households, who spend a larger portion of their income on necessities subject to consumption taxes.
Implementing a VAT at the level required to replace current income and corporate taxes would necessitate a rate of at least 45 percent. This would likely cause a one-time surge in inflation, raising the prices of goods and services across the board. Historical precedent from Japan, where a VAT increase from 5 percent to 8 percent caused significant inflation, suggests that a similar pattern would occur in the U.S. under Project 2025’s plan.
The regressive nature of a consumption tax means that it would disproportionately affect lower-income households. The middle 20% of households, for instance, would face an average tax increase of $5,900 under this system, while the top 0.1% would receive a $2 million tax cut. This shift represents a staggering redistribution of the tax burden from the wealthy to the poor and middle class.
Project 2025’s tax reforms are likely to be unpopular with the general public, particularly given widespread concerns about tax fairness. Polling data shows that a large majority of Americans believe the wealthy and corporations do not pay their fair share of taxes. The regressive nature of Project 2025’s proposals, which would raise taxes on the middle class while cutting them for the wealthy, could lead to significant political backlash.
Criticism of the plan has already begun to surface from economic experts and advocacy groups. Kobie Christian, a spokesperson at Unrig Our Economy, stated, “This analysis lays bare how the extreme, conservative Project 2025 plan is more of the same from conservative leaders—delivering handouts to the wealthy and corporations on the backs of working people.”
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