Project 2025: How It Cuts Employee Benefits Without Increasing Wages
And gaslights workers into thinking they're getting more "freedom" (Scroll to the end to listen)
Project 2025 takes aim at employee benefits on multiple fronts. Today, we cover one of them: Benefits offered by public companies and mid-size businesses.
The United States is one of the only developed nations to tie benefits like health insurance and retirement savings to employment. While I would prefer that we divorce these benefits from employment, I don’t believe most Americans would support a socialized system, no matter how it is presented.
Other developed nations provide these benefits as part of the national welfare, because they believe affordable access to healthcare and retirement savings are basic human rights. I wish more Americans felt that way.
But the latter means higher taxes. Our billionaire donor class won’t stand for that. Instead, they will own most information portals and use them to convince average American voters of the evils of socialism while sponsoring documents like Project 2025 to target Americans’ hard-earned savings.
Here’s how Project 2025 will gut employee benefits for most Americans, while convincing American workers these changes give them more “freedom.”
Wages vs. Benefits. The current tax code has a strong bias that incentivizes businesses to offer employees more generous benefits and lower wages. This limits the freedom of workers and their families to spend their compensation as they see fit—and it can trap workers in their current jobs due to the jobs’ benefit packages.
Project 2025, page 697
While I agree that many Americans remain in unattractive jobs because of benefit packages, Project 2025 offers no real relief. Republicans certainly don’t plan to have the government step in and provide these benefits like most other developed countries.
The framers’ cynical assertion? Lower salaries are the employee’s fault for expecting benefit packages. Businesses might pay their employees higher salaries if they didn’t offer these pesky, expensive benefits for the tax deductions.
And how exactly do benefit packages limit the freedom of workers and their families to spend their compensation as they see fit? Participation in most benefit programs is not mandatory.
If a worker doesn’t want the company-sponsored healthcare plan, she doesn’t have to sign up. If she isn’t interested in contributing to a 401K or other retirement plan, she isn’t required to. Ancillary benefits like life insurance and supplemental accident policies are also opt-in. Companies don’t force their employees to visit the on-site gym.
The opening paragraph sets up the complete and total garbage that follows.
Wage income is taxed under the individual income tax and under the payroll tax. However, most forms of non-wage benefits are wholly exempt from both of these taxes. To reduce this tax bias against wages (as opposed to employee benefits), the next Administration should set a meaningful cap (no higher than $12,000 per year per full-time equivalent employee—and preferably lower) on untaxed benefits that employers can claim as deductions.
Project 2025, page 697
HELLO, SALARIED AMERICANS! BEHOLD ANOTHER HIDDEN TAX INCREASE BILLIONAIRES AND MILLIONAIRES WON’T PAY!
Before diving deeper, let’s illustrate what this could mean with a hypothetical scenario.
Say your current salary is $75,000 per year, and you have $15,000 in pre-tax benefits, making your total compensation package $90,000 per year.
But Republicans win both houses of Congress and the presidency in November. On Inauguration Day, Congress passes a bill to limit employer deductions on untaxed benefits to $10,000 per employee/per year for 2025, and the President signs it.
Your employer immediately announces that your untaxed benefits will be limited to $10,000 per year, but they agree to give you a $5,000 raise. (A dream scenario. In reality, most employers would limit benefits without giving employees the difference.)
You will pay taxes on the added $5,000 in salary. Without knowing where this hypothetical employee lives and how they will file, let’s assume a simple 20% tax on these funds.
$5,000 x 20% = $1,000 additional taxes owed on monies that were previously tax-exempt.
But wait! There’s more.
Your employer now says you can no longer cover your dependents on your health insurance policy as part of meeting the $10,000 limit. Your husband stays home with your two children. If you want them to continue to have health insurance, you will be required to purchase health insurance for the three of them on the private market.
For simplicity, let’s assume dependent health insurance coverage through your employer cost you $5,000-per-year pre-tax. But now you must purchase policies for one healthy adult male and two healthy children. The Affordable Care Act is your cheapest option, clocking in at $1,023 per month for basic coverage, less than what you had with your employer but all you can afford.
You are now paying $12,276 per year for lesser health insurance coverage for your family with after-tax dollars. Depending upon your family’s ongoing health needs, this change will cost you a minimum of around $8,300 in year 1.
Your overall compensation was just reduced from the $90,000 you had before ($75,000 salary + $15,000 untaxed benefits) to $81,274 ($80,000 salary + $10,000 untaxed benefits - $1000 additional taxes - $7,276 additional after-tax health insurance costs.) And that’s IF your family members remain healthy.
This change equals a 10% cut in overall compensation plus inferior health insurance for your family. It’s NOT a good deal.
Companies have lower individual costs for most benefits because they negotiate for a pool of people, which distributes risk and/or administrative costs across the pool. This proposal will require employees to take after-tax dollars to purchase their own benefits on the open market, most likely at higher prices.
Again, Project 2025 offers no alternative to this removal of benefits other than “purchase your own benefits with your after-tax salary on the private market.” Or don’t. They don’t care because the government shouldn’t care because “government doesn’t care” = “salaried employees have more ‘freedom’ + billionaires, millionaires, and corporations pay fewer taxes and hoard even more money.”
Billionaires and millionaires will end up with your hard-earned money either way, because they own the vehicles salaried taxpayers will be forced to use for health and other insurances and similar. Private benefits will cost salaried employees more on the open market because they are negotiated individually AND they will be purchased with after-tax dollars.
Employee benefit expenses other than tax-deferred retirement account contributions should count toward the limitation, whether offered to specific employees or whether the costs relate to a shared benefit like building gym facilities for employees. Tax-deferred retirement contributions by employers should not count toward this limitation insofar as they are fully taxable upon distribution.
Only a percentage of Health Savings Accounts (HSA) contributions (which are not taxed upon withdrawal) should count toward the limitation.
Project 2025, page 697
Targeted employee benefits therefore include:
health insurance premiums
retirement savings that is not taxable upon distribution
insurance premiums paid on key employees
long-term care insurance premiums
supplemental insurance premiums
gym facilities for employees
childcare facilities for employees
dining facilities for employees
some health savings account contributions
and more
The limitation on benefit deductions should not be indexed to increase with inflation.
Project 2025, page 697
This is code for “we will eventually do away with these benefit deductions altogether.” Otherwise known as yet another salary reduction and tax increase.
Employers should also be denied deductions for health insurance and other benefits provided to employee dependents if the dependents are aged 23 or older.
Project 2025, page 697
Because dependents aged 23 or more need to enter the job market and be good workers so they can take their own meager after-tax dollars and buy their own benefits in the private market. They don’t need pesky things like advanced degrees or overseas volunteer work or Mommy and Daddy giving them cushy lives so they can slack at home.
The framers of Project 2025 actually believe 23-year-olds should be married (one-man-to-one-unrelated-woman only) and have at least one future worker, I mean, child. In my experience, Christian Nationalists are very high on young marriage. Because too much life experience = too many possibilities to question the Bible + women delaying childbirth for education and career opportunities + young people with options beyond family, work, and church.
I hope Trump voters are reading the Project 2025 document. At what point are these people going to realize voting to 'own the libs' eventually becomes a 'self-own'? I wonder how happy they are going to be if they have to downscale their standard of living to make ends meet.
Also, I'd like to know where the fuck married 23 year olds are supposed to live. My son is 23 and he is still living at home while attending school. My husband and I know we will be helping him get his feet off the ground. Things are different for his generation than they were for mine and many others.
I think well-meaning people - which these people most definitely are NOT - can ponder how to achieve greater efficiency, in everything. Ultimately our resources, material, human, and especially time, are finite and limited, and wealth, or more correctly standard of living, which we can and should define more broadly, is all about getting the most out of those resources. We had the same number of atoms in our world millennia ago (a smaller human population though) and the only difference between now and then is how we've figured out what to do with them. I don't think (I hope) anyone would argue that life was better centuries or even decades ago.
I think efficiency is the goal, but it's an elusive goal. It's easy to assume market discipline will solve everything, and then to come up with a superlibertarian policy agenda like this one and pretend it will work. Again, I don't think that's what they're doing; this is a cynical billionaire agenda. But there may be some people who see promise and possibility in it.
The problem is that in the real world there are endless markets failures. People seek to gain advantage and rig markets. Solving one issue often just moves pressure to other areas.
If I were asked to pull back and give a big picture perspective, I see two main things holding humanity back.
First, the distribution of wealth seems highly inefficient to me. Most people do not have enough, and it limits their options in life, leading to inefficient outcomes. Nothing is as inefficient as poverty, for instance. Meanwhile a much smaller population has far more wealth than it can possibly put to good use, and it's very easy, and justified, to criticize the choices and behavior of the rich.
Second, profits are supposed to be competed away. Profit should not persist. It should always be competed down to the economy's neutral rate of return. Perhaps it is for many businesses, but there are clearly many which enjoy windfalls over long periods of time. This is a clear sign of inefficiency.
Personally, I still don't trust the most left-leaning voices on economic issues, although I think they mean well, and I admire many of them for their stand on social issues. But the conservatives in this country are a clear and present danger to everything we hold dear in life, and it is far far safer to experiment with whatever policies Democrats come up with, even when they turn out to be mediocre, than to give the other side any opportunity to implement their agenda.
And to the more specific point raised today, I suspect that in any situation involving insurance, whether for health, for retirement, for whatever, the most efficient solution is going to be to do it at a national level, with one provider (the state). The challenge then is for the state to run it well, and not subsidize unhealthy, destructive or counterproductive behaviors, but it seems rather clear to me that the alternative does not work, but just sorts people into good risks, and everyone else, which correlates heavily with wealth, replicating the problem of wealth distribution which vexed humanity and holds us back.