Update 797 — RNC Platform/Project 2025
Focus: GOP Fiscal, Tax, Tariff Policy Plans
The American political split screen appeared fractured yesterday as Donald Trump wavered between gauzy, vapid calls for unity and a litany of recriminations and threats in his meandering GOP nomination acceptance speech in Milwaukee. All the while, leading Democrats in Washington applied mounting pressure on a publicly still-defiant President Biden to withdraw from the presidential race, amid rampant speculation about how soon he might.
The specter of a Republican win in November is concentrating the progressive mind on the dangers of a second Trump administration — dangers made clear in the GOP platform and the encyclopedic manifesto known as Project 2025. Today, we look at the alarming and extreme promises and proposals therein relating to fiscal, particularly tax, and trade/tariff policy.
Good weekends, all…
Best,
Dana
Trump’s campaign statements and the official 2024 GOP platform adopted this week offer limited insight into specific policy changes the Party plans to pursue, should it prevail in November. Project 2025, the Heritage Foundation’s wide-ranging effort to reorganize the American government and economy, has, however, published a 900-page-plus Mandate for Leadership with detailed policy proposals available in the case of a second Trump Presidency. It is not a given that Trump and the GOP would embrace the policy ideas proposed in the Mandate for Leadership wholesale, but these ideas can be used to fill in the blanks in the sparse and telegraphic Trump-endorsed Republican party platform.
Tax Policy
Tax is a central policy focus in this year’s election cycle as outcomes will decide the balance of power in next year’s “tax super bowl,” in which Congress will consider whether to extend expiring individual and estate provisions of Trump’s landmark Tax Cuts and Jobs Act (TCJA) enacted in 2017. Across-the-board extensions, which are supported by Trump and included in the GOP platform, could cost upward of $4.6 trillion, according to the Congressional Budget Office (CBO). The majority of this lost revenue would go to wealthy individuals. Corporations would continue to enjoy massive breaks that were included as permanent provisions in the TCJA.
In addition to supporting the extension of TCJA provisions that expire in 2025, Trump and the GOP both have endorsed removing taxes on tip wages, a tactic they have been using to counter the narrative that their tax cuts are skewed toward the wealthy.
Though Trump and the GOP have restricted the scope of their messaging on tax policy to the items mentioned above, they have often noted their support for “additional cuts.” The Mandate for Leadership outlines very specific tax policies that would cripple federal revenues and exacerbate the tilt of the tax code toward wealthy individuals and large corporations if passed into law, notably including:
- Tax Brackets/Top Marginal Rate – Simplify individual income taxation by creating two brackets with rates of 15 and 30 percent. The 30 percent top marginal rate would kick in at the FICA payroll cap, which is around $168,000. This bracket would essentially create a broad “flat tax” (equal rates regardless of income), as people do not currently pay FICA taxes on income over this threshold. The additional 15 percent tax would be roughly equivalent to what people now pay on the portion of their income under the cap, thus leveling income tax rates across the income distribution and undermining the progressivity of our tax code. According to Brendan Duke, the senior director for economic policy at the Center for American Progress (CAP), a family with two children making $5 million would see a $325,000 federal tax cut whereas a similar family making $100,000 would see a tax increase of $2,600.
- Corporate Tax Rate – Lower the corporate tax rate from 21 percent to 18 percent (almost half of what it was before the TCJA).
- Capital Gains and Dividends Tax Rate – Lower the tax rate for capital gains and dividends to 15 percent with the intention of evening the taxation of wages and capital. Under this reform, the corporate income tax rate (18 percent in the Mandate for Leadership) combined with the capital gains or qualified dividends tax rate would be roughly equal to the top individual income tax rate (33 percent and 30 percent, respectively).
- State and Local Taxes (SALT) – Repeal the $10,000 cap on State and Local Tax deductions enacted through the TCJA.
- Estate Tax – Cap the estate tax rate at 20 percent (half the current top marginal rate) and make the heightened exemption thresholds of $13.5 million for individuals and $27 million for couples enacted through the TCJA permanent.
- Repeal Key Existing Tax Provisions – Repeal the net investment income tax (NIIT) for Medicare as well as all tax increases that were passed as part of the Inflation Reduction Act (IRA), including the corporate alternative minimum tax (CAMT), the stock buyback excise tax, the book minimum tax, the coal excise tax, the reinstated Superfund tax, and excise taxes on drug manufacturers to motivate compliance with Medicare price controls.
- Procedural/Process Reform – Require a supermajority in both chambers of Congress to raise individual and corporate taxes. This proposal was included to ensure the new rate structure can be protected from future Democratic attacks.
- Tax Administration (IRS funding) – Claw back the remaining $60 billion investment in the IRS from the IRA and hold funding for the agency constant in real terms. The IRA originally provided $80 billion in funding for the IRS, but Republicans successfully fought to repeal a fourth of this funding in the debt-ceiling negotiation last year. The proposed cuts would devastate the agency that has made leaps and bounds of progress since the IRA investment was made, as they are already having to dip into supplemental funding for basic operations. Cutting funding for the IRS is another way to secure “tax cuts” (i.e., through encouraging cheating by reducing a credible threat of enforcement) without passing meaningful or specific policies.
While estimates of the cost of these proposals were deliberately omitted from the Project 2025 tax platform, leaving some uncertainty about their total fiscal impact, we can be sure that these reforms would come be an enormous drain on federal revenues and yield economic inequality. Democrats have been laser-focused on undoing the harm done by the costly, inequitable TCJA reforms. Republican success in November could lead to a greater concentration of wealth by both raising rates for the poorest Americans and further slashing rates for wealthy individuals and corporations who least need the savings.
Tariffs and Trade Policy
After the Biden Administration announced tariffs on select China imports in May, Trump began to outline his own vision for trade policy in the event of a second term. He has repeatedly said in interviews he favors a 10 percent across-the-board tariff alongside a 60 percent tariff on Chinese goods. The former President claims tariff hikes would raise revenue and bolster American manufacturing, a claim that is challenged by many economists.
The Tax Foundation predicts the proposed tariffs would reduce long-run GDP by 0.8 percent. In the event retaliatory tariffs are implemented, most worryingly from China, their long-run prediction expands to 1.2 percent. These tariffs could also raise taxes on middle-class families up to $8,300 a year, according to the Biden administration. The current administration also cites the concern that broad tariffs run the risk of increasing the inflation rate by 0.75 percentage points.
The GOP platform supports “baseline Tariffs on Foreign-made goods,” without citing the 10 percent statistic specifically. The platform also clearly reinforces the conservative belief that increasing tariffs means lower “Taxes on American Workers, Families, and Businesses.” The platform suggests the need for the “Trump Reciprocal Trade Act” to be passed by Congress, granting the President further authority to match and raise tariffs imposed on the United States, thus expanding the already broad range of power the executive branch holds over levying tariffs.
The Mandate for Leadership, on the other hand, presents two opposing visions on tariffs with papers entitled “The Case for Fair Trade” along with, “The Case for Free Trade.” The inclusion of these two competing pieces renders inconclusive what the project has in mind for trade policy in the event of a second Trump administration. It does, however, provide insight into the division within the Republican Party between those who support a free market approach and those favoring protectionism. While candidate Trump has signaled his intention to bolster tariffs and promote a protectionist trade policy, the free market proponents in the party may slowly be drowned out.
Social Security and Medicare
It’s also important to discuss GOP plans for important government entitlements Social Security and Medicare. As these programs comprise a significant portion of our long-term projections for increases in the national debt, they are prime targets for the GOP and Trump who will seek to exhibit some sense of fiscal balance amid plans to cut taxes and increase spending on defense.
While proposals for these programs in the Mandate for Leadership and the GOP platform are vague and convoluted, lessons can be learned from combining previous statements and actions by Trump and the GOP with information that was included in these platforms.
- Social Security – There is no specific mention of Social Security reform in Project 2025. The program is only mentioned in the context of other proposals, like the individual income tax structure detailed above, which would set brackets based on the FICA payroll cap. Notably, the GOP platform endorsed by Trump states that they will “fight for and protect Social Security and Medicare with no cuts, including no changes to the retirement age.” This is contradictory to past Republican/Trump proposals and actions and should be seen as an empty promise. Republicans have taken pretty much any reform that would protect benefits off the table such as payroll tax increases or reforming the $168,000 FICA cap, reinforcing the likelihood that cuts remain on the table. When asked about Social Security and Medicare in an interview earlier this year, Trump himself stated “There is a lot you can do in terms of entitlements, in terms of cutting.”
- Medicare – As mentioned above, Trump and the GOP have come out in favor of preventing cuts to Medicare benefits accompanied by contradictory statements. The Mandate for Leadership outlines plans to make Medicare Advantage (a private alternative to Medicare Parts A, B, and D) the default option for Medicare enrollment, which could set the stage for the privatization of the program and put health insurers above beneficiaries. It also includes plans to repeal changes to Medicare Part D included in the Inflation Reduction Act that cap out-of-pocket prescription drug prices and give more authority for Medicare to negotiate drug prices. According to CAP, “Medicare Part D enrollees across the nation could lose out on up to $7.4 billion in out-of-pocket savings next year.”
Debt and Deficit
The Mandate for Leadership does not have a specific section dedicated to the national debt or deficit but they are mentioned throughout the proposal. The spirit of the Project 2025 team’s strategy is encapsulated in the following statement:
“The budget should be balanced by driving down federal spending while maintaining a strong national defense and not raising taxes,”
a goal that, according to analysis from the Center for a Responsible Federal Budget (CRFB), “would require the equivalent of ending all nondefense appropriations and eliminating the entire Medicaid program” if Defense, Veterans, Medicare, and Social Security – areas Republicans have said they would protect – are off the table.
Supplemental proposals include:
- requiring the OMB director to provide the President with a “fiscal target” early in the Presidential budget process,
- advising the Treasury Department to issue longer-term bonds to lock in relatively low rates on securities and lower interest payments, and
- providing the American people with financial statements of the U.S. government and each family’s share of the national debt.
In addition to these ideas, high-ranking Republicans have been reportedly exploring legalizing impoundment, an outlawed practice whereby the President withholds funds appropriated by Congress.
Despite lip service to the importance of fiscal responsibility throughout the GOP platform and Mandate for Leadership, the costly tax proposals show a willingness to put the wealthy and corporations above all else, at the cost of the U.S. fiscal condition and working Americans. The lack of specific revenue estimates in the Mandate for Leadership was likely an intentional omission to avoid explicitly stating their combined fiscal impact. This agenda will only serve to aggravate the national debt, shift more of the tax burden on working- and middle-class Americans, and take away valuable government services.
Conclusion
When combined with Project 2025’s plan to fire perhaps up to a million civil servants and replace them with handpicked supporters loyal to Trump and a far-right Supreme Court majority that appears willing to give even more authority and immunity to presidents, there can be no doubt that Trump and his conservative allies would consolidate more power within the presidency while pushing fiscal policy in an extreme direction.
The designs outlined by Project 2025’s Mandate for Leadership and the GOP platform would have dire consequences for America as a whole – economically and otherwise – especially for those who are most vulnerable, such as low- and middle-income and otherwise economically disadvantaged workers and families. Knowledge and forewarning of what Trump and the GOP have in mind raise the already-high stakes in this election for all Americans, and make it clearer: staying home is not an option.