With Trump now confirmed to reassume the presidency on January 20th 2025, the now infamous Project 2025 Policy Agenda is back in the news again. Interestingly, it does not mention any crypto-related policies at all. So from a financial perspective, what will be the impact on the US economy on different segments of the population if Project 2025 is implemented next year?
As the 2024 presidential election campaign intensified, both Republican and Democratic candidates evolved their position on cryptocurrencies. The Nashville Bitcoin conference saw Donald Trump and other candidates hold nothing back in their pitch for crypto votes. With Trump now victorious the crypto world is celebrating. Interestingly, though, this infamous Project 2025 Policy Agenda actually doesn’t mention Bitcoin or crypto at all.
Although President Trump says he knows nothing about Project 2025, it does line up with many of his policy positions and previous statements and there’s no reason to think it wouldn’t be implemented should he retake the Oval Office. So good or bad, what’s in it for Americans?
The Genesis and Goals of Project 2025
The Project 2025 Policy Agenda is a 900-page conservative blueprint, developed by the Heritage Foundation, which lays out a comprehensive plan for overhauling the admittedly bloated US federal government. With proposals spanning tax reforms, energy production, labour laws, and social issues, Project 2025 promises to reshape the American landscape profoundly if implemented by the next Republican president.
Project 2025 was crafted by over 400 conservative contributors under the guidance of former Trump administration officials Paul Dans and Spencer Chretien. It is envisioned as a detailed roadmap for the next Republican presidency, proposing significant restructuring of federal agencies, rolling back climate policies, and shifting economic strategies. The blueprint has been embraced by conservative circles as a potential guide for a second Trump administration.
Sweeping Tax Reforms
One of the most significant and contentious aspects of Project 2025 is its proposal to overhaul the U.S. tax system. The current tax structure, which includes seven tax brackets ranging from 10% to 37%, is fairly criticised by the project as overly complex and burdensome. No one is denying this. Indeed, in his ill-fated debate with Donald Trump, President Biden stated “what I’m going to do is fix the tax system” before throwing out a host of nonsensical statements about billionaires paying their fair share. So instead of the current seven brackets, Project 2025 advocates for a simplified system with just two tax brackets: a 15% flat tax for incomes up to approximately $168,000 and a 30% tax for higher incomes. Additionally, the plan aims to eliminate most deductions, credits, and exclusions, though it does not specify which ones would be removed.
While this seems reasonable, some economists warn that these changes could lead to significant tax increases for middle-class families.
VP candidate J.D, Vance says the Trump campaign wants to expand the child tax credit. Source: This Week with George Stephanopoulos – 11 August 2024
For example, a family earning $100,000 annually could see their tax bill rise by $2,600 under the 15% flat tax, especially if the Child Tax Credit is eliminated. However, interviewed on This Week with George Stephanopoulos on August 11th, vice presidential candidate J. D Vance said that the Trump ticket wants to expand the Child Tax Credit.
This is also the position of the RNC, which states in its policy document; “Republicans will make permanent the provisions of the Trump Tax Cuts and Jobs Act that doubled the standard deduction, expanded the Child Tax Credit, and spurred Economic Growth for all Americans. We will eliminate Taxes on Tips for millions of Restaurant and Hospitality Workers, and pursue additional Tax Cuts.”
Wealthy individuals could also benefit from substantial tax cuts under Project 2025, with estimates suggesting that a married couple earning $5 million a year could enjoy a $325,000 tax reduction. Multi-millionaire couples would be rare, of course, as according to US Census data, the average personal income in the U.S. is approximately $63,214, while the median household income is around $74,580.
Corporate and Capital Gains Taxes
Project 2025 also proposes reducing the US corporate tax rate from 21% to 18%, aiming to stimulate investment and economic growth. The corporate tax has been contentious in recent years, with the last Republican administration slashing the corporate tax rate by 40% in 2018 to 21%. Certainly, the move paid off for investors as since 2018, the US stock market, particularly the S&P 500, has seen significant growth.
For example, if you had invested $1000 in the S&P 500 at the beginning of 2018, your investment was worth approximately $2197.80 by mid-2024, assuming all dividends were reinvested. This equates to a cumulative return of 119.78%, or an average annual return of about 13.06%. This period includes notable volatility, such as the market crash in early 2020 due to the COVID-19 pandemic, followed by a strong recovery. Incidentally, $1000 invested in Bitcoin on January 1st 2018 would today be worth $4490- an increase of 449%. President Biden’s 2025 budget called for a rise in the corporate tax rate to 28%.
| Period | US Top Corporate Tax Rate |
|---|---|
| 1950-1951 | 42% |
| 1951-1952 | 50.75% |
| 1952-1963 | 52% |
| 1964 | 50% |
| 1965-1967 | 48% |
| 1968-1969 | 52.8% |
| 1970 | 48% |
| 1971-1978 | 48% |
| 1979-1986 | 46% |
| 1987 | 40% |
| 1988-1992 | 34% |
| 1993-2017 | 35% |
| 2018-present | 21% |
Additionally, in measures that are designed to boost economic activity, Project 2025 calls for lowering the capital gains tax for high earners from 20% to 15% – which would return it to the rate that applied during most of the Bush and Obama presidencies from 2003 to 2013.
Other Economic Proposals
Beyond tax reforms, Project 2025 includes several other economic proposals:
- Energy Production: Expanding oil and natural gas production to increase energy security.
- Federal Reserve: Some proposals suggest eliminating the Federal Reserve or diminishing its powers, with others advocating a return to “free banking.”
- Medicare and Medicaid: Transforming Medicaid into a block grant program and making Medicare Advantage the default option for new enrollees.
- Labour Laws: Weaken child labour protections, allowing teens to work in dangerous jobs with parental consent. The plan also proposes changes to overtime laws and additional labour reforms.
- Consumer Protections: Eliminating the Consumer Financial Protection Bureau and potentially the Federal Trade Commission.
- Immigration: Increasing funding for a border wall, restricting visa access, and dismantling the Department of Homeland Security.
Political Reactions and Implications
Joe Biden and Kamala Harris highlighted Project 2025 as a significant threat to the country’s economic stability and social progress. Biden once described it as “the biggest attack on our system of government and our personal freedom that has ever been proposed in the history of this country.”
As mentioned, Trump distanced himself from the plan, claiming no involvement in its creation and expressing disagreement with some of its recommendations. Despite this, many former Trump officials were involved in developing the blueprint, indicating alignment with his administration’s broader goals.
Conclusion
Project 2025 represents an ambitious and controversial vision for the future of the United States. Read in its entirety, it is not the ‘end of the world’ it is being portrayed as. Certainly, there is plenty that goes further than most would be comfortable with, but its implementation would require significant legislative support from both parties, which likely dooms the most radical changes anyway. Nonetheless, its potential impact on the economy and American society could be profound.
While initial reactions have been predictably negative, it’s undeniable that many U.S. federal agencies are inefficient and wasteful. The proposal to eliminate the Federal Reserve could gain support after the economic debacle of the COVID years and run away inflation. As the election approaches, the debate over these proposals will likely intensify, along with the place for crypto in the US economy, as few believe the status quo is working anymore.
Source: https://bravenewcoin.com/insights/project-2025-and-your-wallet-balancing-challenges-and-opportunities