Project 2025 goals would transform wealth management landscape

A conservative blueprint for Donald Trump's potential second presidential term calls for drastic changes to tax policy and financial regulations. But the extent of the Republican candidate's support for the proposals and intentions to enact them has turned murky in recent weeks.

As backers of the incumbent Democrat in the White House, Joe Biden, have pointed out the potential restrictions on abortion, LGBTQ rights and nonpartisan federal employment in the plan — known as Project 2025 — Trump said earlier this month that he finds some aspects of the 922-page blueprint "absolutely ridiculous and abysmal." 

A much shorter official Republican party platform adopted ahead of this week's GOP convention in Milwaukee offers fewer details and, in the case of tax policy, a less far-reaching proposal for the future. However, some of Trump's top advisors and strongest advocates at the right-wing Heritage Foundation wrote Project 2025, and 100 conservative groups have signed on to its advisory board. The document provides the most substantive goals of the conservative coalition rallying behind Trump.

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For financial advisors and their clients, Project 2025 would carry a major impact to individual income taxes, Employee Retirement Income Security Act guidelines at the Department of Labor, the operations of the Securities and Exchange Commission, the shape of cryptocurrency regulations and many other areas. 

For example, Project 2025 described the SEC and the industry self-regulatory organization it oversees, FINRA, as "poorly managed and organized." FINRA and a similar entity that inspects the firms that audits broker-dealers, the Public Company Accounting Oversight Board, are "ineffective, costly, opaque, and largely impervious to reform," and should be abolished in favor of returning their duties to the SEC, according to Project 2025. If policymakers don't follow that advice, the document called for much more public scrutiny of FINRA and its arbitration forum.

"The policy vision in Project 2025 is remarkably developed and specific as it relates to capital markets policy," Michael Canning, the founder of public policy consulting firm LXR Group, said in an email. "The document envisions a root-and-branch retooling of securities laws and remaking of the SEC, in the name of reducing complexity and promoting capital formation. Capital formation would become the overriding policy focus."

Project 2025 would "consolidate all capital market regulatory functions" into the SEC with the abolition of the agencies and then turn Wall Street's primary regulator into a body that is "less independent and more accountable to the policy arms of the executive branch," he added.    

"The document is particularly enthusiastic about the private and semi-private offering space, with calls to expand both Regulation A and Regulation CF crowdfunding," Canning said. "State regulators would explicitly be pushed almost totally out of regulating offerings. In many ways the recommendations closely mirror the goals of Republicans on Capitol Hill, particularly in the House."

Many of those GOP lawmakers are currently pushing to extend provisions of the 2017 Tax Cuts and Jobs Act that would expire in 2026 into the future, and the party's platform advocates for making them permanent. Project 2025 would go further by dividing the income bracket into just two — at 15% and 30% — from the current seven before ultimately shifting into what it called the "fundamental tax reform" embodied by a "consumption tax." 

While Trump routinely says he will cut taxes, it's not clear where he stands on this particular proposal or any others in the document. In a post on his social media website this month, he criticized some parts of the plan while wishing the writers luck with their goals.

"I know nothing about Project 2025," Trump said. "I have no idea who is behind it. I disagree with some of the things they're saying and some of the things they're saying are absolutely ridiculous and abysmal. Anything they do, I wish them luck, but I have nothing to do with them."

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However, the plan has been gaining more attention since Biden's poor debate performance last month and a continuing rise in optimism among Trump's backers about his prospects for victory after he survived an assassination attempt in Pennsylvania over the weekend. In their own social post, Biden's team rejected Trump's effort to distance himself from Project 2025.

"He's trying to hide his connections to his allies' extreme Project 2025 agenda," Biden said in a statement released by his campaign to the Associated Press and other media outlets. "The only problem? It was written for him, by those closest to him. Project 2025 should scare every single American."

The signed authors of the sections relevant to wealth management certainly display ties to Trump and his prior administration. Stephen Moore, one of three co-authors of the chapter on the Treasury Department and the IRS, has been a senior economic advisor to Trump. Another, William Walton, is a private equity, media entrepreneur and talk show host who was part of Trump's 2016 transition team. The third co-author of the tax section and the writer of the chapter about the SEC, David Burton, is a senior fellow in economic policy at the Heritage Foundation. 

The author of the part about the Labor Department, Jonathan Berry, led the agency's regulatory office during Trump's presidency after being part of the transition team.

Representatives for the Project 2025 coalition told Financial Planning that none of the authors or other policy experts were available for an interview about the potential impact to financial regulatory agencies, tax reforms and retirement advice rules. Representatives for the Heritage Foundation didn't respond to a request for comment.

Scroll down for a brief look at the document's proposals for wealth management-related policies. And follow these links to see the possible shifts in banking and mortgages.

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Taxes

Under the "intermediate" phase of the tax policy transformation, those with income of $168,600 or above would pay a 30% rate and taxpayers below that level would face 15% bills. Corporate taxes would fall to 18%, and capital gains and qualified dividends would see a 15% rate. Then, the policies would move into their more "fundamental" rearrangement toward proposals such as taxes linked to sales, business transfers, cash flow or simply a flat rate.

"Achieving fundamental tax reform offers the prospect of a dramatic improvement in American living standards and an equally dramatic reduction in tax compliance costs," the document said. "Lobbyists, lawyers, benefit consultants, accountants and tax preparers would see their incomes decline, however. The federal income tax system heavily taxes capital and corporate income and discourages work, savings and investment. The public finance literature is clear that a consumption tax would minimize government's distortion of private economic decisions and thus be the least economically harmful way to raise federal tax revenues."

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ERISA

The Labor Department should "consider bringing enforcement actions against BlackRock and State Street Global Advisors for their violations of fiduciary duty" managing the federal Thrift Savings Plan and remove any involvement of ESG criteria from ERISA's guidelines, according to the plan.

"While Americans are free to invest their own savings however they wish, in ERISA, Congress imposed strict duties on employer-sponsored worker retirement plans as a prophylactic protection of workers' retirement security in general," the document said. "Recognizing the unique status of employer-managed retirement savings, in ERISA, Congress required that fiduciaries exclusively seek the best interests of plan beneficiaries. Because ESG investing necessarily puts other considerations before the interests of the beneficiary, ESG investing by plan managers is an inappropriate strategy under ERISA."

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Cryptocurrency

The plan seeks clarity for the treatment of digital assets in a way that would put most of them under the authority of the Commodity Futures Trading Commission as a commodity rather than a security supervised by the SEC. Congress should enshrine that distinction into law if the regulatory agencies fail to issue rules to that effect, according to the plan.

"Both the SEC and the CFTC have been irresponsible actors in the digital asset area," Project 2025 said. "They have had more than a decade to promulgate rules governing digital assets, yet the SEC has utterly failed to do so, and the CFTC has provided only minimal guidance. Instead, both agencies have chosen regulation by enforcement — and have done it poorly. They neither adequately protect investors nor provide responsible market participants with the regulatory environment that they need to thrive."

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FINRA

While the discussion of FINRA comes near the end of the lengthy document, Project 2025 took specific aim at it and other self-regulatory organizations that it said need "more robust oversight." If the SEC doesn't abolish FINRA outright, the next administration must make its Board of Governors meetings public, disclose potential rulemakings in advance and open access to arbitration and disciplinary hearings as well, according to the plan. The blueprint would also establish much stricter oversight by the SEC and Congress through regular public reports on FINRA's activities and the installation of inspector general watchdogs, it said.

Two other proposals would "require FINRA arbitrators to make findings of fact based on the evidentiary record and demonstrate how those facts led to the award given (except with respect to very small claims)" and obligate all fines to "go either to a newly established investor reimbursement fund or to the Treasury" on the grounds that "SROs should not have a financial interest in imposing fines."

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SEC

The plan would eliminate what it called "discrimination based on immutable characteristics" at the SEC in the form of "offices at financial regulators that promote racist policies (usually in the name of 'diversity, equity, and inclusion')." In addition, the regulator would undergo a wholesale realignment that would include tossing out the SEC's climate change reporting rule.

"The Securities and Exchange Commission should be reducing impediments to capital formation, not radically increasing them," the plan said. "The SEC and Congress should fundamentally reform the securities laws governing issuers, broker-dealers, exchanges, and other market participants. Among other things, they should establish a simplified and rationalized securities disclosure system with three basic categories of firm: private firms, an intermediate category of smaller firms and public firms; reasonable, scaled disclosure requirements; and specified secondary markets for the securities of these firms. The SEC needs to be reformed to achieve its important core functions more effectively, to improve transparency and due process and to reduce unnecessary regulatory impediments to capital formation."