New Report Outlines Lease Policy Changes for Next Conservative President

10 July 2024

The title page reads, “Mandate for Leadership, the Conservative Promise — Project 2025, Presidential Transition Project.” What follows are 920 pages of sweeping changes for the “next conservative president” to put into effect or, if not sufficiently empowered, to recommend to Congress. From abortion to veterans affairs, the anthology of 30 chapters, each by a different author, is a prepackaged game plan for the next administration to hit the ground running with a conservative wish list.

Tax Reform: Two Stages

Tax reform would take place in two stages. Stage 1 “intermediate” reform would retain the basic structure of the Tax Cuts and Jobs Act but dramatically adjust its moving parts. Stage 2 “fundamental reform” would abolish individual and corporate income taxes and replace them with a consumption tax. The plan calls for the IRS budget to be cut, and as with other executive agencies, more of its top personnel would be appointed by the president.

Led by the Heritage Foundation, more than 50 conservative organizations collaborated on the Project 2025 volume. After President Joe Biden’s poor performance in the June 25 debate and the close ties between former President Donald Trump and the Heritage Foundation, the bulky tome — originally published in April 2023 — can no longer be ignored by those seeking to prepare for the future. The tax policy and tax administration changes are found mostly in Chapter 22, “Department of Treasury.”

Stage 1: Intermediate Reform

Under the intermediate plan, individuals and their employers would continue incurring a combined payroll tax of 15.3%. After a standard deduction, income tax will be incurred at 15% up to the payroll tax cap of $168,600 (adjusted for inflation) and at 30% for income that exceeds that amount. Capital gains and qualified dividends would be indexed for inflation and taxed at 15%.

“Most deductions, credits and exclusions” would be repealed, with deductions for state and local taxes and educational expenses being specifically called out. The 3.8% net investment income tax would be repealed. Combined, the payroll tax and income tax start to look like a flat tax with a 30% rate.

Given Project 2025’s emphasis on promoting small business, it is strange that the 20% deduction for passthrough businesses scheduled to expire at the end of 2025 is not mentioned.

Universal savings accounts would be established, allowing all individuals to contribute up to $15,000 annually (indexed for inflation) in after-tax dollars and withdraw funds tax free at any time or for any reason. Basically, the accounts are Roth IRAs without restrictions. Employers could deduct no more than $12,000 of most nonwage benefits, including employer-sponsored health insurance, per employee each year.

However, retirement account contributions and a share of health savings account contributions would be exempt from the cap. Excluded from the limitations are tax-deferred retirement accounts such as traditional IRAs and section 401(k) plans. The authors would not index the $12,000 limit for inflation, and “to fund pro-growth tax cuts,” they suggest that lawmakers phase down the limitation.

The estate and gift tax rate would be set at no higher than 20 percent, and the temporary increase in the exemption amount from $5.5 million to $12.9 million (adjusted for inflation) introduced in the TCJA would be made permanent.

The corporate tax rate would be reduced from 21% to 18%. Capital expenditures would be written off in the first year. It is not stated whether structures and other property that have depreciable lives of more than 20 years would be denied expensing, as they are under today’s law.

The authors assert that the corporate tax is “the most damaging tax in the U.S. tax system.” Most economists would agree. Also, the authors assert that the “primary burden” of the corporation tax falls on workers. Most economists wouldn’t agree. The Joint Committee on Taxation, for example, assigns 75% of the burden of the corporate tax to capital owners and 25% to labor.

The intermediate tax reform would basically repeal the Inflation Reduction Act of 2022, including the corporate alternative minimum tax and the tax on stock buybacks. And it would repeal the tax breaks for clean energy.

Regarding international tax, the tax rate on global intangible low-taxed income, now 10.5% (scheduled to rise to 13.125% in 2026) would be “reduced to no higher than 12.5%.” The rate on foreign-derived intangible income would be set equal to the GILTI rate. (To get a 12.5% effective rate with a statutory rate of 18%, the section 250 deduction percentage would be set at 69.44%.) The 20% haircut that applies to foreign tax credits related to GILTI would be reduced or eliminated. There is no mention of changing the expense allocation rules that under current law can reduce FTCs and impose additional U.S. tax when foreign tax is above the GILTI rate.

The authors describe the OECD as “a taxpayer-funded left-wing think tank and lobbying organization.” They urge the United States to withdraw from and end its financial support to the OECD. The same goes for the World Bank and the International Monetary Fund.

The seal for the International Monetary Fund is seen near the World Bank headquarters (R) in Washington, DC on January 10, 2022. (Photo by Stefani Reynolds / AFP) (Photo by STEFANI REYNOLDS/AFP via Getty Images)AFP via Getty Images

“The IMF has intervened in American policy debates,” they point out, “and has even recommended that the U.S. raise taxes.” That is true: As recently as June 27, the IMF issued a statement telling U.S. policymakers they “need to carefully consider raising indirect taxes” and “progressively increasing income taxes.” The statement specifically recommends “reinstating a more generous, refundable Child Tax Credit … and raising the income threshold for eligibility for the Earned Income Tax Credit for workers without children.”

Stage 2: Fundamental Reform

After those immediate reforms, Project 2025 urges the next president to promote fundamental tax reform, and it leaves the door wide open. Among the possibilities mentioned are a national sales tax, a business transfer tax (a subtraction method VAT), a Hall-Rabushka flat tax, and a cash flow tax. The document does not explicitly say so, but we can assume the intent is that those taxes would replace the individual and corporate income taxes — and possibly payroll taxes.

Of those four categories (and within the categories there are several variations), three collect taxes exclusively from businesses: the sales tax, business transfer tax, and cash flow tax. Those three also (in most versions) have border tax adjustments, which means that revenue from exports is excluded from the tax base and imports are subject to tax. Only the flat tax collects tax from individuals and businesses, and the flat tax shuns those border tax adjustments.

Noticeably absent from the list of consumption taxes are a credit-invoice VAT used by most other nations and an X-tax, which is a progressive consumption tax.

Trade and Tax Policy

Before the TCJA was passed in 2017, Republicans on the House Ways and Means Committee seriously considered implementing a border-adjustable destination-based cash flow tax to replace income taxes on corporations and passthrough entities. Yes, it would be a tax (tariff) on imports and tax cut (subsidy) on exports. Yes, it looks like protectionist policy. But according to standard economic principles, the dollar will appreciate and offset any tendency for the tax law to improve the trade balance.

For economists the main attraction of the DBCFT is its positive effect on capital formation (because a consumption tax would replace the corporate tax). In Chapter 26 of the Project 2025 volume, Peter Navarro, former director of the White House National Trade Council under Trump, argues for U.S. tariffs. In particular, he urges enactment of the U.S. Reciprocal Trade Act, which would allow the president to impose tariffs on goods from a foreign country at the same rate that the foreign country imposes on imports of similar U.S. goods.

WASHINGTON, DC – JANUARY 25: Peter Navarro, a former advisor to former U.S. President Donald Trump arrives at the E. Barrett Prettyman Courthouse on January 25, 2024 in Washington, DC. Navarro, who was found guilty of contempt of Congress in September of 2023 is attending his sentencing hearing. (Photo by Anna Moneymaker/Getty Images)Getty Images

The bill (H.R. 764, 116th Cong.) had the support of 28 House Republicans in 2019, and more significantly, Trump urged its passage in his State of the Union address that year. Navarro writes:

“In summary, passage of the USRTA would go a long way toward leveling the playing field for American farmers, ranchers, manufacturers, and workers who are now forced to compete in an intrinsically unfair, unbalanced, and nonreciprocal [World Trade Organization] system. Nor is the USRTA necessarily the only possible legislative way to address this issue.”

He then describes how the DBCFT got so much attention from House Republicans immediately before passage of the TCJA. (He does not acknowledge the possibility of exchange rate appreciation.) He concludes:

“This tax — strongly opposed by American multinational corporations and big box retailers — not only would have leveled the playing field with respect to WTO rules but also would have provided an innovative alternative to the application of tariffs. A conservative Administration might do well to look at such a tax as part of its trade agenda.” [Emphasis added.]

With protectionist trade measures being so prominent on Trump’s policy agenda, if he is elected we should not be surprised if there is renewed interest in the DBCFT. Yes, it is a long shot. The same opposition from business groups will emerge.

But if Trump is determined to pursue broad-based tariffs that are also strongly opposed by businesses, those businesses might have to choose between tariffs and a DBCFT.

Tax Administration

The plan calls for the IRS budget to be held constant in real terms (so the increase included in the Inflation Reduction Act would be rescinded). Funds and authority of the Office of the Taxpayer Advocate would be increased. The Office of Equity, Diversity, and Inclusion would be closed.

There would be a much greater emphasis on improving technology and potential expansion of funds in this area if “IT management is changed; an effective well-considered implementation plan is adopted; and serious oversight is put in place.” More of the top positions in the IRS would be held by presidential appointees.

Speaking of changes in management, many more of the top positions in the IRS would be held by presidential appointees. Adding to the commissioner and chief counsel, presidential appointees would include at a minimum:

  • The deputy commissioner for services and enforcement
  • The deputy commissioner for operations support
  • The national taxpayer advocate
  • The commissioners of various divisions including Wage and Investment Division
  • A new presidentially appointed deputy commissioner for operations support
  • Various senior IT managers

All of that would be necessary because “the culture, administrative practices, and management need to change.”

Also, information reporting should be restrained. Interest on overpayments would be increased. The time limit for suing for improper collection would be extended. The Tax Court’s jurisdiction would be expanded. And there would be relief from the “most punitive penalties.”

What’s Possible? It Depends

If Trump is elected, many expect him to exercise executive power to its fullest extent. If Democrats control either house of Congress, much of his agenda requiring legislation will likely be stymied. If Republicans gain control of both houses — especially with strong odds in retaking Senate — Trump could likely pass many proposals using a single budget reconciliation bill needing only a simple majority in Senate.

However, some policy goals requiring legislation might not fit into reconciliation if they don’t impact outlays or revenue significantly or if changes are incidental to nonbudgetary components.

New Tax Breaks

The introduction states all authors do not share same views. In Chapter 22 three authors urge most deductions/credits repeal including education deductions.

However other chapters suggest selective expansion:

  • Chapter 11: Endorses Educational Choice for Children Act providing credits for private school tuition donations.
  • Chapter 14: Proposes EITC expansion for non-resident parents supporting children.
  • Chapter 15: Recommends rural housing renovation/repair credits.
  • Chapter 22: Suggests incentives for companies onshoring from China.


The most notable feature: absence of Social Security reform proposals or mentions except where necessary explaining other proposals.

No accompanying revenue estimates or discussions on revenue effects except tangential relevance statements like balancing budget without raising taxes while maintaining strong defense.

No distribution tables or discussions except asserting corporate tax burden mostly falls on labor despite reductions favoring high-income taxpayers disproportionately reducing their taxes ignoring vertical equity concerns.

An Alternative Starting Point

A recent American Enterprise Institute paper offers two options extending TCJA:

  • Option 1: Incremental modified extension promoting economic growth.
  • Option 2: Aggressive pro-growth individual income/corporate business transfer tax replacing corporate taxes.

Differing significantly from Project 2025 plan due inclusion revenue/distribution analysis compelling tough choices evaded by Project 2025 making AEI paper more practical starting point deserving bipartisan attention given estimated effects.


What is Mandate for Leadership, Project 2025 about and its impact on conservative policy?

Mandate for Leadership, Project 2025, is a strategic initiative by conservative think tanks aimed at shaping U.S. policy by preparing a comprehensive governance blueprint. Its impact lies in providing a detailed roadmap for conservative policymakers, influencing legislative priorities and administrative actions.

Can the Mandate for Leadership guide the next conservative president in implementing sweeping changes?

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