You’ve probably seen the headlines screaming about a total overhaul of the IRS. Or maybe you’ve heard people whispering about a "flat tax" that's going to either save the middle class or destroy it, depending on who is talking. Honestly, the Project 2025 tax plan is one of those things that sounds like a fever dream until you actually sit down and read the 900-page "Mandate for Leadership" published by The Heritage Foundation. It isn't just a minor tweak to your 1040 form. It’s a foundational shift.
We're talking about a world where the current seven tax brackets—the ones ranging from 10% to 37%—basically vanish. In their place? A simple two-tier system. It’s radical. Some call it efficient. Others call it a massive shift of the tax burden.
The Two-Bracket Reality of the Project 2025 Tax Plan
Right now, the IRS uses a progressive system. You earn more, you pay a higher percentage on those top dollars. Project 2025 wants to blow that up. The proposal suggests a 15% bracket for people reaching a certain income level and a 30% bracket for the high earners.
Where is the line?
The document suggests the 30% rate should start around the Social Security wage base, which is roughly $168,600 in current terms. If you make less than that, you’re in the 15% bucket. If you make more, you’re at 30%. It sounds simple. It is simple. But simplicity has a price tag. For a family currently sitting in the 10% or 12% bracket, moving to a 15% flat-ish rate might feel like a punch to the gut. On the flip side, someone currently paying 37% on their millions would see a massive discount.
Stephen Moore and other economists who contributed to this vision argue that this drives growth. They think that by making the tax code predictable and less "punitive" toward success, the whole economy lifts off. But critics, like those at the Center on Budget and Policy Priorities, point out that this could lead to a massive revenue hole. We’re talking trillions.
Corporate Taxes and the 18% Target
Businesses aren't left out of the party. The Project 2025 tax plan pushes to drop the corporate tax rate from 21% down to 18%.
Why 18%?
It’s about being "competitive." The argument is that if we have a lower rate than other developed nations, companies won't flee to Ireland or the Cayman Islands. They’ll stay here. They’ll build factories. They’ll hire your neighbor. Or at least, that’s the theory. Skeptics argue we already tried this with the 2017 Tax Cuts and Jobs Act (TCJA), and the results on "trickle-down" growth are still being debated in every coffee shop and ivory tower in the country.
Capital Gains and the Investment Hook
If you trade stocks or own a home, this part matters. The plan looks to cut the capital gains tax. Specifically, it wants to index capital gains to inflation.
Think about it this way. You buy a stock for $100. Ten years later, you sell it for $150. Under current rules, you pay tax on that $50 gain. But if inflation rose significantly in those ten years, that $50 isn't really "profit" in terms of purchasing power. Project 2025 says you shouldn't be taxed on the "inflationary" part of your gain. It’s a win for investors. It’s a nightmare for the IRS's accounting software.
The IRS: From Enforcer to... Something Else?
The plan doesn't just change the math; it changes the math teacher. There is a very specific call to "restructure" the IRS. There’s a lot of talk about the $80 billion in funding the IRS got through the Inflation Reduction Act. Project 2025 wants to claw that back. They see a beefed-up IRS as a weaponized agency.
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They want to shift the focus. Instead of more audits, they want better "customer service." They also want to move toward a system where the IRS doesn't even exist in its current form. Some of the more extreme ideas floated in the orbit of this plan involve moving toward a national sales tax or a consumption tax, though the "two-bracket" system is the primary focus of the written mandate.
What This Means for Your Deductions
This is where the rubber meets the road. To pay for lower rates, you usually have to get rid of "tax expenditures." That’s fancy talk for deductions.
- The mortgage interest deduction?
- The child tax credit?
- State and local tax (SALT) deductions?
The Project 2025 tax plan suggests eliminating most of these "special interest" loopholes. They want a "clean" code. If you live in a high-tax state like California or New York, losing the SALT deduction (which is already capped) would be a huge deal. If you're a parent, losing or shrinking the Child Tax Credit could change your monthly budget overnight.
It’s a trade-off. You get a lower "sticker price" on your tax rate, but you lose the discounts you’ve spent years planning your life around.
The Economic Gamble
Is this "pro-growth"?
Economists like Arthur Laffer—the guy famous for the Laffer Curve—have long championed these kinds of cuts. The idea is that lower taxes incentivize work. If you know the government is only taking 15 cents of your next dollar instead of 22 or 24, you might work that Saturday overtime.
But there’s the deficit.
The U.S. is already trillions in debt. If you cut taxes and don't cut spending by an equal amount, the debt grows. Project 2025 advocates for massive spending cuts to balance this out, targeting everything from Department of Education programs to green energy subsidies. It’s a package deal. You can't really have the tax plan without the massive government downsizing that goes with it.
How This Impacts Different Income Levels
Let’s be real for a second.
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If you're making $50,000 a year, you’re likely in the 12% bracket now. Moving to 15% is an increase. You’d need the "standard deduction" to be significantly higher to break even.
If you're making $500,000, you’re currently hitting brackets as high as 35%. Dropping to 30% is a massive windfall.
This isn't just about "simplifying" things. It’s about who pays. The plan leans heavily into the idea that the wealthy are the "job creators" and should be unburdened. Whether you agree with that is basically the defining question of American politics right now.
Actionable Insights: How to Prepare
While this is a proposal and not yet law, the momentum behind it is real. If you want to be ready for a potential shift toward the Project 2025 tax plan philosophy, here is what you should actually do:
- Watch the SALT limits: If you are planning to buy a home in a high-tax area, do your math based on the possibility that the State and Local Tax deduction might disappear entirely. Don't overleverage yourself assuming the government will subsidize your property taxes.
- Evaluate your 401(k) vs. Roth: In a lower-tax environment, Roth accounts (where you pay tax now to get tax-free withdrawals later) become incredibly attractive. If rates drop to 15% or 30% and stay there, paying the tax now might be the smartest move you ever make.
- Diversify your income streams: The plan favors capital gains and business income over standard W-2 wages. If you've been thinking about starting an LLC or moving more money into brokerage accounts, the "pro-business" tilt of these proposals suggests those structures will be favored.
- Stay liquid: Radical tax changes usually cause a period of market volatility as investors rebalance their portfolios to account for new after-tax returns. Having a cash cushion allows you to pivot without being forced to sell assets during a dip.
The tax code is never set in stone. It’s a living document that reflects who has power in Washington. Project 2025 is a roadmap, and whether we drive down that road or not, knowing where it leads is the only way to keep your finances from ending up in a ditch.