Future Taxes?
The Heritage Foundation’s Project 2025 received some attention in the Presidential campaign. President-elect Trump never endorsed the project during his campaign, and in fact his many of his suggestions—for example, to eliminate income taxes on tips and overtime hours—run counter to the Project’s philosophy. Still, it may provide clues to the direction of changes that the Republicans may favor next year.
What does Project 2025 advocate for taxes? Some highlights:
- Estate and gift taxes. The 2017 doubling of the amount exempt from transfer taxes should be made permanent, and the tax rate lowered to 20%.
- Individual income taxes. There should be only two tax rates, 15% and 30%. The top tax rate should begin at the Social Security wage base, so that the tax on wage income is nearly flat above the standard deduction.
- Corporate taxes. The corporate income tax rate should be reduced to 18%.
- Capital gains. Qualified dividends and realized long-term capital gains should be taxed at 15%.
- SALT. The deduction for state and local taxes should be repealed entirely. (During the campaign, President-elect Trump advocated removing entirely the $10,000 cap, going in the opposite direction.)
- Repealed taxes. The Net Investment Income Tax should be repealed, together with the new taxes added to the Tax Code by the Inflation Reduction Act (such as the book minimum tax, the stock buyback excise tax, and the coal excise tax).
- Supermajorities for raising taxes. A three-fifths majority in the House and Senate should be required for increasing individual or corporate tax rates. Earlier contributions have the benefit of many more years of compounding growth.
The problem that Congress will have to grapple with before extending the 2017 tax reforms, or creating new tax cuts, is that deficit spending is already at historic levels, and arguably is not sustainable, especially when interest rates are above average.
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