{"id":158565,"date":"2024-10-31T01:00:33","date_gmt":"2024-10-31T05:00:33","guid":{"rendered":"https:\/\/marcstier.com\/blog2\/?p=158565"},"modified":"2026-09-19T18:58:37","modified_gmt":"2026-09-19T22:58:37","slug":"what-project-2025-means-for-pennsylvania-taxpayers","status":"publish","type":"post","link":"https:\/\/marcstier.com\/blog2\/?p=158565","title":{"rendered":"What Project 2025 Means for Pennsylvania Taxpayers"},"content":{"rendered":"

Originally published at Pennsylvania Policy Center<\/a> on October 31, 2024.<\/em><\/p>\n

<\/div>\n

by Marc Stier<\/em><\/p>\n

If the federal government in Donald Trump\u2019s potential second term were to adopt the tax proposals in Project 2025, low- and moderate-income Pennsylvanians would pay far more in taxes than they do now and the top 1% would pay much less.<\/p>\n

That should worry Pennsylvanians. For, if we follow the letter of what Project 2025<\/a> proposes, a family of four at the state median family income level of $119,000 would pay an additional $7,167 in taxes. And a family of four with an annual income of $50,000 would pay an additional $7,031 in federal taxes. But a family of four that just breaks into the top 1% of Pennsylvania families, with $750,000 in income, would pay $12,675 less<\/strong> in federal taxes.<\/p>\n

If, contrary to what Project 2025 <\/em>explicitly says, we assume that earned income and child tax credits are not repealed, the increase in taxes for a family of four with $119,000 in income would be only $3,167, while the increase for a family of four with $50,000 in income would be $1,040. A family of four with an income of $750,000 would still receive a huge tax cut of $12,675.<\/p>\n

And note that these changes in paid taxes do not include the proposed limit on the deductibility of employee benefits, including paid health care, discussed below. That limit would raise taxes for many middle-income Pennsylvanians. Also not included in the analysis are reductions in the tax rate on capital gains and corporate profits, which would reduce taxes for the top 1%.<\/p>\n

Recognizing the danger of the extreme Project 2025 agenda on taxes and other issues for his political prospects, Donald Trump has disavowed knowledge of or support for Project 2025<\/em>. But alumni of Trump\u2019s first administration wrote much of it. If one looks at the connections between Trump and the authors of Project 2025<\/a>, it\u2019s likely that a second Trump administration would certainly be staffed and guided by those who wrote the plan.<\/p>\n

More importantly, the tax proposals in Project 2025 <\/em>are even worse than what Trump sought and achieved with his 2017 tax cuts. The 2017 tax cuts were heavily tilted to wealthy multinational corporations<\/a> and to the rich<\/a>, who received a disproportionate share of the benefits. The Project 2025 tax proposal would add additional tax cuts for those who already pay too little but would raise taxes on those with low and moderate incomes.<\/p>\n

So, let\u2019s take a closer look at why the Project 2025 tax proposals lead to results so harmful to low- and moderate-income Pennsylvanians, while helping those at the top, first with regard to individual taxes and then corporate taxes. Keep in mind that there are limitations to how precise our analysis can be, both because the Project 2025 proposal is not terribly detailed and because the precise implications of some of their proposals require a far more detailed analysis than we can do for this preliminary report.<\/p>\n

Individual Taxes<\/strong><\/h2>\n

Currently, there are seven marginal rates in the federal income tax: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These tax rates are tied to inflation-adjusted federal income tax brackets<\/a>. And remember that a marginal tax rate means that a taxpayer pays that rate only for income above the threshold for their tax bracket. For example, for couples filing jointly, the 12% rate applies to annual income over $23,200 and below $94,301. The 32% rate applies to income above $383,900 but below $487,451. The 37% rate apples to income over $731,000.<\/p>\n

Project 2025 proposes a reduction of our seven personal income tax rates to two, an initial one at 15% and a second one at 30% beginning at the \u201csocial security wage base,\u201d which is currently $168,600 (Project 2025<\/em>, p. 696.) It also proposes to \u201celiminate most deductions, credits and exclusions.\u201d It\u2019s not totally clear whether that means eliminating the standard deduction since the document also says that the goal of the plan is to create a \u201cnearly flat tax on wage income beyond the standard deduction.\u201d  For the purpose of this brief, we are assuming that the standard deduction would remain unchanged. And because Project 2025 is not as clear as it should be about whether the Child Tax Credit and Earned Income Tax Credit would be repealed, we are analyzing the impact of Project 2025<\/em> under both scenarios.<\/p>\n

Just looking at the changes in tax rates, it is clear that Project 2025 would place a greater burden on low-income families, making our tax system less fair. Raising the rate on the lowest two tax brackets from 10% and 12% to 15% raises taxes for everyone, but it disproportionately hurts families and individuals with income below $94,000. Meanwhile, setting the highest rate at 30% benefits households that currently pay marginal rates at 32% or above\u2014that is those with income over $383,900.<\/p>\n

There are other tax changes proposed by Project 2025 that would harm many low- and moderate-income households. The plan calls for capping tax-free employee benefits at $12,000 per family. That would raise taxes for families receiving a variety of employee benefits and especially health insurance benefits.<\/p>\n

In 2022, 54.5% of the population had health insurance that was paid for in part by their employer<\/a>. The percentage has historically been a little higher in Pennsylvania. According to the Kaiser Family Foundation<\/a> Employer Health Benefits survey, in 2023 the average employer health plan for families cost $23,968 of which the employee paid $6,575 and the employer paid 17,303. If tax-free employee benefits were capped at $12,000, then the average employee would have to pay taxes on the difference between $17,303 and $12,000\u2014that is, $5,393. At the 15% rate, that means an average additional tax burden of $809. Project 2025 says that capping tax-free employee benefits is justified to eliminate the tax preference for employees receiving benefits instead of wages. But it does not admit that any shift in compensation from tax-free benefits to wages will lead to higher taxes for working people.<\/p>\n

Because not all families received employer-paid health insurance, this amount is not included in our estimates of the burden of the Project 2025 tax plan. But it would hurt roughly half of all Pennsylvania families and individuals.<\/p>\n

Another change in individual taxes excluded from our calculations is a proposed reduction in the highest tax rate on capital gains from 20% to 15%. Of course, this change would overwhelmingly benefit families with the highest incomes.<\/p>\n

Finally,  Project 2025 also calls for creating universal savings accounts, similar to Roth IRAs, that would allow all taxpayers to set aside up to $15,000 per year in income, which would accumulate tax-free. The plan would allow reduce taxes only for families that can afford to save some of what they earn. But low- and moderate-income families and individuals can afford to save very little of their income. Studies of household saving rates show that the bottom 90% of households by income typically save around 4% of their income. But people in the top 1% save about 38% of their income, while those in the 90th to 99th percentile save at roughly a 12% rate. So, a universal savings plan\u2014like much lower marginal tax rates for high-income families\u2014largely benefits the well off.<\/p>\n

Corporate Taxes<\/strong><\/h2>\n

When it comes to corporate taxes, the Project 2025 plan is also tilted heavily to wealthy corporations. And since the wealthiest 10% of Americans own 93% of corporate stock<\/a>, they will be the main beneficiaries of the proposed reduction in the corporate tax rate from 21%\u2014which is already far below the 35% it was before the Trump tax cuts of 2017\u2014to 18%.<\/p>\n

Project 2025 also calls for the United States to withdraw from the international agreement to create a minimum 15% tax on corporations. As the plan recognizes, this agreement was meant to stop countries from competing against one another to draw businesses\u2014or at least shell companies that serve to hide corporate profits\u2014to their shores. Most economists believe that this competition is a problem because this \u201crace to the bottom\u201d discourages countries from asking corporations to pay a reasonable share of taxes. Corporations benefit a great deal from government. They ship goods\u2014and their workers arrive\u2014on roads, bridges, and railroads and in planes that land at airports that are paid for with public dollars. Those workers secure the education and training they need to be productive at the public\u2019s expense. They benefit from government research dollars that are responsible for new, productive processes and products, including the internet, which now plays such a critical role in business. Yet when corporations do not pay their share of the cost of those goods, then families\u2014the same families that are already paying for the goods and services they purchase from those corporations\u2014must pick up the slack. The result is that corporate profits increase, and that redounds to the benefit of the already rich people from the top 10% (and overwhelmingly from the top 1%) who are stockholders.<\/p>\n

What for most economists is a bug of international competition is a feature in Project 2025. A race to the bottom is what they want, precisely because it will lead to greater rewards for corporations and those who own them.<\/p>\n

Other Provisions<\/strong><\/h2>\n

Finally, Project 2025 has two other important tax policy proposals.<\/p>\n

The first is to roll back President Biden\u2019s increase in funding for the IRS. Nothing shows the Project\u2019s fundamental concern for the well-being of the wealthy than this action. New funding at the IRS has already collected more than $500 million in unpaid taxes from fewer than 2,000 delinquent millionaires. And at the same time, average taxpayers find that customer service at the IRS is much improved. A reduction of funding at the IRS would diminish its enforcement activity, which is almost always directed at millionaires and above\u2014because that is where the money is.<\/p>\n

The other general tax proposal is to enact by legislation, or possibly constitutional amendment, rules to prevent Congress from raising taxes without a three-fifths majority in both the House of Representatives and the Senate. Creating this barrier to higher taxes would make it more difficult to meet the ongoing and future needs of the country and its people. We can\u2019t always say today what our needs will be in the future. But we should not hamstring the ability of the federal government to meet those needs. And there are two future issues that we recognize today and that will require new taxes: making up for shortfalls in the Social Security and Medicare trust funds. If Congress can\u2019t raise new revenue to extend the life of those trust funds, we will see cuts to both Social Security and Medicare in the not-too-distant future.<\/p>\n

Conclusion<\/strong><\/h2>\n

In sum then, we can see why former President Trump wants to disavow Project 2025. When it comes to taxes, as well as many other issues\u2014including the right to reproductive health care and the checks and balances between the president and Congress\u2014Project 2025 is a threat to the well-being of average Pennsylvanians.<\/p>\n","protected":false},"excerpt":{"rendered":"

Originally published at Pennsylvania Policy Center on October 31, 2024. by Marc Stier If the federal government in Donald Trump\u2019s potential second term were to adopt the tax proposals in Project 2025, low- and moderate-income Pennsylvanians would pay far more in taxes than they do now and the top 1% would pay much less. That should worry Pennsylvanians. For, if we follow the letter of what Project 2025 proposes, a family of four at the state median family income level of $119,000 would pay an additional $7,167 in taxes. And a family of four with an annual income of $50,000 would pay an additional $7,031 in federal taxes. But a family of four that just breaks into the top 1% of Pennsylvania families, with $750,000 in income, would pay $12,675 less in federal taxes. If, contrary to what Project 2025 explicitly says, we assume that earned income and child tax\u2026 Continue reading<\/a><\/p>\n","protected":false},"author":1896,"featured_media":158564,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"{title}\n\n{excerpt}\n\n{url}","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false,"jetpack_post_was_ever_published":false},"categories":[291,288,315,309],"tags":[],"class_list":["post-158565","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog-post","category-penn-policy-center","category-policy-brief","category-policy-paper"],"jetpack_publicize_connections":[],"jetpack_shortlink":"https:\/\/wp.me\/p35YuU-Ffv","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"jetpack_featured_media_url":"https:\/\/i0.wp.com\/marcstier.com\/blog2\/wp-content\/uploads\/2026\/09\/admin-ajax.png?fit=600%2C314&ssl=1","_links":{"self":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/158565","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/users\/1896"}],"replies":[{"embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=158565"}],"version-history":[{"count":1,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/158565\/revisions"}],"predecessor-version":[{"id":158731,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/158565\/revisions\/158731"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/media\/158564"}],"wp:attachment":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=158565"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=158565"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=158565"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}