As a seasoned tax attorney, I’ve been closely following the tax policy agenda developed by influential conservative groups for a potential second Donald Trump presidential term. This plan, known as the Mandate for Leadership, has already garnered attention for its controversial immigration recommendations. However, it also includes far-reaching tax and economic initiatives, including a shift to a consumption tax and greater White House control of the IRS. (source)
The umbrella group Project 2025, organized by the Heritage Foundation, claims to represent the views of about 100 conservative organizations that form its advisory board. The authors of this plan include Stephen Moore, a key source of fiscal and monetary policy advice in Trump’s first term, and Russell Vought, Trump’s former budget director.
Interestingly, tax policy was not a top priority for Trump in his first term. Despite this, the individual provisions of the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025, which will inevitably lead to significant decisions for the president and Congress. The Mandate calls for dramatic changes, proposing a shift to a consumption tax in two steps.
The first step involves replacing the current revenue system with one built on individual income tax rates of 15 percent and 30 percent, with an unspecified standard deduction. The plan also proposes repealing ‘most deductions, credits, and exclusions’, although only a few are identified. For instance, taxpayers would no longer be able to deduct any state and local taxes or educational expenses. However, nonresident parents with child support orders could claim a new credit.
The second step involves a transition towards a pure consumption tax. The plan suggests that the ultimate system could be a national sales tax, a business transfer tax, a flat tax, or a cash flow tax.
Furthermore, the plan proposes dramatic changes in government operations, including tax administration. It suggests increasing the number of political appointees at the IRS and freezing its budget at current levels. It also proposes centralizing control of the federal bureaucracy in the White House, freezing hiring, and giving the president broad authority to fire federal workers.
While these proposals are ambitious, it remains to be seen whether they will be embraced and implemented. As always, it’s crucial for us as responsible citizens to stay informed about these potential changes and understand their implications. Remember, knowledge is power when it comes to making informed financial decisions and fulfilling our tax obligations.