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One of the hallmarks of Donald Trump’s presidential campaign was a promise of sweeping tax cuts, for the rich, for working people and for companies alike.
Now congressional Republicans have the job of figuring out which of those cuts to propose into law. In order to pay for the cuts, they have started to eye some targets to raise money. Among them: cutting benefits for single mothers and poor people who rely on government health care.
The proposals are included in a menu of tax and spending cut options circulated this month by House Republicans. Whether or not Republicans enact any of the ideas remains to be seen. Some of the potential targets are popular tax breaks and cuts could be politically treacherous. And cutting taxes for the wealthy could risk damaging the populist image that Trump has cultivated.
For the ultrawealthy, the document floats eliminating the federal estate tax, at an estimated cost of $370 billion in revenue for the government over a decade. The tax, which charges a percentage of the value of a person’s fortune after they die, kicks in only for estates worth more than around $14 million.
Among those very few Americans who do get hit with the tax, nearly 30% of the tax is paid by the top 0.1% by income, according to estimates by the Tax Policy Center think tank. (Many ultra-wealthy people already largely avoid the tax. Over the years, lawyers and accountants have devised ways to pass fortunes to heirs tax free, often by using complex trust structures, as ProPublica has previously reported.)
Another proposal aims to slash the top tax rate paid by corporations by almost a third.
Trump promised such a cut during the campaign. But Vice President JD Vance came out against it before Trump picked him as his running mate. “We’re sort of in line with the OECD right now,” he said in an interview last year, referring to the Organization for Economic Cooperation and Development, a group of 38 wealthy developed nations. “I don’t think we need to be cutting the corporate tax rate further.”
In Trump’s first term, he brought the top corporate rate down from 35% to 21%, where it’s at now, taking the U.S. from a high rate compared to other OECD nations to about average. The proposed cut to 15% would make the United States’ rate among the lowest of such countries.
To pay for new tax cuts, the House Republicans’ proposal floats a series of potential overhauls of government programs. One major focus is possible cuts to Medicaid, the health care program for people with low incomes that is administered by the states. Medicaid expansion was a key tenet of the Affordable Care Act, passed under President Barack Obama. Many Republican governors initially chose not to take advantage of the new federal subsidies to expand the program. In the intervening years, several states reversed course, and the program has expanded the number of people enrolled in Medicaid by more than 20 million, as of last year.
The deep cuts to the program floated in the document include slashing reimbursements to the states. States would need to “raise new revenues or reduce Medicaid spending by eliminating coverage for some people, covering fewer services, and (or) cutting rates paid to physicians, hospitals, and nursing homes,” according to an analysis by KFF, a health policy organization.
Trump has been inconsistent in his position on Medicaid over the years. He sought to slash the program in his first term. But he has also made statements about protecting it over the years.
As recently as a 2023 campaign event, Trump promised that “we’re not going to play around with Medicare, Medicaid.” But it’s not clear whether the comment was a throwaway: While preserving Medicare, the program that covers health care for the elderly, has been a focus for Trump, maintaining Medicaid has not. The official GOP platform rolled out by Trump last year, for example, promised not to cut “one penny” from Medicare but was silent on Medicaid. In separate remarks during the campaign last year, Trump appeared to endorse cuts to "entitlements," after an interviewer asked about Medicare, Medicaid, and Social Security.
Other proposals would eliminate tax breaks for families with children.
Currently, parents can get a tax credit of up to $2,100 for child care expenses. The House Republican plan floats the elimination of that break. The cut is estimated to save $55 billion over a decade.
Vance, in particular, had promised economic policies that would lessen the load on parents. “It is the task of our government to make it easier for young moms and dads to afford to have kids,” he said last week. (He campaigned on a proposal to more than double the child tax credit.)
Another proposal in the list of options takes aim squarely at parents raising children on their own. The provision would eliminate the “head of household” filing status to collect almost $200 billion more in taxes over a decade from single parents and other adults caring for dependents on their own.
The “head of household” status was created in the 1950s under the rationale that single parents should have a lighter tax burden. Eliminating it would affect millions of Americans, largely women. (The after-tax pay of people with incomes between the 20th and 80th percentiles, those making between about $14,000 and $100,000, would fall by the highest percentage, according to an analysis by the Tax Foundation.)
Democrats have criticized the proposals as a gift to the wealthy at the expense of the working class. “Republicans are gearing up for a class war against everyday families in America,” Sen. Ron Wyden, D-Ore., said in a statement.
A White House spokesperson did not respond to questions about the specifics in the House GOP document but said in an email that “This is an active negotiation and process one that the President and his team are working productively with congress. His visit to the House Retreat [Monday] was a sign that he wants to prioritize unity and a good deal for American that achieves his campaign promises.”
A spokesperson for the House Budget Committee declined to answer specific questions but said “this is a menu of policy options for authorizing committees to consider as members navigate the reconciliation process.”
Some of the proposals would fulfill Trump’s campaign promises geared toward the working class.
The document includes a plan to eliminate income taxes (but maintain payroll taxes) on tips, at a cost of $106 billion over a decade. The proposal is one Trump touted while campaigning in Las Vegas to win support from the city’s huge contingent of service workers. Trump’s Democratic opponent, former Vice President Kamala Harris, later pledged to do the same. Economists have criticized the idea as one that unfairly benefits one group of working-class employees over others who get paid the same but work in other industries that don’t deal in tips.
Another Trump campaign promise included in the document is ending taxes on overtime pay, at a price of $750 billion over a decade. That proposal has also been criticized by tax experts as an inefficient way to provide relief for lower-paid workers who are eligible for overtime because they’re paid hourly and perform repetitive tasks. The provision, critics say, would invite gaming and further complicate tax reporting by creating new reporting requirements about the hours a taxpayer worked.
One of the biggest-ticket proposals to raise new revenue in the House Republicans’ document would hit a tax break cherished by upper-income Americans: eliminating the mortgage interest deduction. The document estimates $1 trillion in savings over 10 years by eliminating the break. Because of a complex interplay of different features of the tax code, an estimated 60% of the value of this deduction flows to Americans making over $200,000 per year, according to the Tax Foundation.
Eliminating the mortgage interest deduction would have an uneven geographic impact: analyses have found the tax break is more valuable to Americans in Democratic-dominated states such as California, Massachusetts and New Jersey.
Pratheek Rebala contributed research.
Do you have any information about the tax proposals that we should know? Robert Faturechi can be reached by email at robert.faturechi@propublica.org and by Signal or WhatsApp at 213-271-7217. Justin Elliott can be reached by email at justin@propublica.org or by Signal or WhatsApp at 774-826-6240.
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Last April, West Virginia awarded a nearly $10 million contract to a company called Student First Technologies to manage the state’s Hope Scholarship program, which gives families about $4,900 per child to spend on private-school tuition and homeschooling expenses. The company’s founder, Mark Duran, reacted with delight. “We are very excited to serve your great State,” he wrote.
But problems soon emerged, as reflected in emails obtained by a ProPublica public-information request. Some private schools were so late in receiving their voucher payments from families that they were having trouble meeting payroll. In late August, a state official wrote to Duran with a list of invoices that needed to be paid promptly, including three from a school, Beth Haven Christian in Chauncey, that had “called and indicated they are experiencing significant cash flow issues.” The email continued, “We need to make sure they have their funds early in the day if at all possible.”
The school eventually got its funds. But the episode highlights the challenge that states are facing with their rapidly expanding school-choice programs: making sure the taxpayer money they are allowing families to spend on behalf of their kids is being processed efficiently and properly. To do so, they are relying on a small group of fledgling companies that have seized the opportunity to serve as middlemen for this fast-growing market. The work can be lucrative, but it has also proven so daunting that in several states, the companies that carry it out have ended up losing contracts to their rivals — sometimes less than a year after winning them — as questions arise and audits and lawsuits pile up.
An idea sold on the basis of its simplicity — give parents money to spend on their kids’ education as they see fit — has turned out to be anything but simple in practice. And this complexity comes at a cost: paying companies to run the programs.
There are now a dozen states in the country that offer universal private-school vouchers, making them available to families of any income level. The largest of those programs, in Florida, is now costing taxpayers nearly $3 billion a year, with the programs in Arizona and Ohio each drawing around $1 billion a year from taxpayer funds.
In some of the states, the money comes to parents in the form of “education savings accounts,” which can be used on education-related expenses other than tuition. These programs are especially complex to implement, since some form of oversight is needed to make sure families are spending the money in ways that comply with the rules.
Angling for the task of managing this spending are four companies. The largest is ClassWallet, which is based in Hollywood, Florida. Its founder, Jamie Rosenberg, initially offered its online procurement technology to teachers and administrators to reduce the amount of paperwork involved in school expenditures. But the company has shifted to capitalize on the school-choice market. With backers including Lazard Family Office Partners, a global investment firm, ClassWallet has more than 200 employees and contracts in more than 10 states, among them Florida and Arizona, the latter of which has faced headlines about some parents using state education aid for questionable purchases as the cost of its program has swelled far beyond projections.
The smallest is Student First, based in Bloomington, Indiana, with 14 full-time employees. Both its founder, Duran, and its chief technology officer were educated in alternative settings, including homeschooling and so-called learning pods — kids from multiple families clustered together — and say they view the company as part of the larger cause of promoting school choice. Duran, 30, previously worked for his family’s homebuilding company in northern Michigan, served as lifestyle assistant and boat captain for an executive couple and their family, and helped deliver a yacht on a 4,000-mile journey from northern Michigan to Key Largo, Florida, via Nova Scotia, Canada, and Nantucket, Massachusetts.
The other two companies fall in between in scale. Odyssey, based in lower Manhattan, was founded by Joseph Connor, 37, a former teacher and lawyer who had previously created a company called SchoolHouse, which connected teachers with the learning pods that sprouted up during the pandemic. Odyssey, with about 40 employees, has received investor funding from Andreessen Horowitz and Tusk Venture Partners, among others. It works with Iowa and Wyoming and recently won contracts for the newly expanding voucher programs in Georgia and Louisiana.
The fourth, Merit International, is based in Silicon Valley, and it likewise has considerable venture-capital backing, including from Andreessen Horowitz; its contracts include programs in Ohio and Kansas. The 100-person company also manages payments for government programs outside of education. One of its co-founders, Jacob Orrin, said in an interview that he, too, was drawn to the school-choice business by his background: He struggled in school when he was young, and he says he would have greatly benefited from having had more educational options. “We’re mission-driven — but we make a profit,” he said.
Competition among the companies often gets fierce as they face off in state after state. They dispatch lobbyists to cast aspersions on their rivals with legislators and state officials. They try to influence the legislation creating the voucher programs to tailor them to their company’s offerings. They feed whisper campaigns among parents about problems arising in states where their rivals are in charge.
In Iowa, after Odyssey won that state’s contract in 2023, Student First and an Iowa organization it was partnering with brought a legal challenge, alleging “substantial material misrepresentations” by Odyssey; an administrative judge dismissed the suit.
In Arkansas, the state had selected ClassWallet in 2023 to manage its Education Freedom Accounts, which give families about $7,000 per student. But last spring, the state considered switching to Student First to save money. A lobbyist for ClassWallet paid visits to state legislators, warning them that this was a bad idea. “They sent someone to talk to me,” recalled state Sen. Bart Hester, a Republican from Cave Spring. The lobbyist for ClassWallet explained that the company has three times the number of employees as Student First. “‘There’s no way they can do it,’” the lobbyist said, according to Hester.
Student First won the contract, worth about $15 million over seven years. But by October, state officials had decided to switch back to ClassWallet, saying that Student First had missed deadlines to set up the program, was late in processing payments, and owed the state $563,000 in fees as a result of the delays. “Student First Technologies is proud of our work to empower Arkansas families,” Duran wrote in a response to questions from ProPublica. (Of Student First’s experience in West Virginia, he said the company has been making “month-on-month improvements, and this will never stop.”)
ClassWallet previously became embroiled in difficulties one state over, in Oklahoma. A 2022 investigation by The Frontier and Oklahoma Watch found widespread questionable spending under a program in which Gov. Kevin Stitt, a Republican, provided $18 million in federal pandemic-relief funds for families to use for private-school vouchers or educational materials, to be overseen by ClassWallet. Some used the state aid to buy Christmas trees, gaming consoles, electric fireplaces, outdoor grills, dishwashers, pressure washers, car stereo equipment, coffee makers, exercise gear, smartwatches and at least 548 TVs.
The 2022 article quoted Rosenberg, the ClassWallet CEO, praising the program at a 2020 panel discussion: “They were literally able to deploy $18 million without having to engage any human capital from the government agency, and for it to be almost hands-free and incredibly, incredibly streamlined.” But a subsequent federal audit reported that ClassWallet had blamed Oklahoma for the abuses, saying that the company had offered to limit purchases to items preapproved by the state, but that a teacher who helped arrange the contract — Ryan Walters, now Oklahoma’s education secretary — had declined this option. (Walters did not respond to a request for comment.)
The problems with the program sparked an odd three-way legal fight, with Stitt attempting to sue ClassWallet and Oklahoma’s own attorney general opposing the governor and blaming problems on poor state oversight. (The Stitt administration is still pursuing the case, now using outside lawyers. ClassWallet has said the claims are “wholly without merit.”) The company declined to respond to specific questions, but spokesperson Jason Hart provided a statement saying “ClassWallet is the country’s most trusted citizen digital wallet technology platform.”
In Idaho, ClassWallet had the contract to administer an early-pandemic initiative that evolved into what is now called Empowering Parents, a $30 million state program that gives families up to $3,000 each for supplemental educational expenses. The current system could be a possible prelude to a full voucher program, which is up for debate now in the Legislature. Odyssey won the contract in 2022, for $1.5 million per year. A year later, the state ordered an audit after receiving reports of spending on clothes, TVs, smartwatches and other noneducational items. The audit found that only a tiny sliver of purchases were inappropriate, but it ordered Odyssey to pay back the state for $478,656.22 in interest it had collected from unspent federal funding for the program.
Meanwhile, parents and business owners were reporting other issues with the program under Odyssey’s oversight, as reflected in emails obtained under a Freedom of Information Act request filed by ProPublica. Last February, Tina Stevens, the owner of a music store and academy in Coeur d’Alene that is one of the program’s biggest vendors, wrote to her state senator saying that she had lost $10,000 because families were unable to access their funds to pay for music classes. She also wrote that Odyssey’s requirement to ship all purchases to families was wasting money. (Odyssey said the shipping requirement was imposed by the state.) The system, Stevens wrote, is “rife with more fraud than we ever saw last year and super easy to cheat.” Stevens elaborated in an interview, saying that in one instance, she was required to ship a digital piano via a freight truck, at a cost of $423, even though the family it went to had come in person to select it. And it took her 1,000 hours, she said, to list and update her products on Odyssey’s online marketplace for the program.
Still, she said, the difficulties had not undermined her support for the program. “Parents and kids need musical products and a lot of kids can’t afford it,” she said. “I’ve had mothers coming in the door crying, saying ‘I never thought I could get a musical instrument, and now my kid can have something I never thought they could have.’”
In September, the director of the Idaho State Board of Education, Joshua Whitworth, wrote to Odyssey’s CEO, Connor, listing problems, including “ongoing customer service concerns,” sales taxes charged in error, and vendors being owed payments since January 2024. Connor replied with a lengthy email defending the company, saying that the company had an above-average customer satisfaction rating in Idaho and paid out the “vast majority” of orders within a week. But days later, Idaho said it was switching back to ClassWallet.
Emails show ClassWallet executives and lobbyists celebrating their victory and collaborating with state officials over how to word the announcement. “The tone of this one was markedly more vicious,” said one of the participants in the Idaho competition, describing the latest round. “It’s like two heavyweights exchanging blows.”
In response to questions about the loss of the Idaho contract and the problems that preceded it, a company spokesperson said, “Odyssey’s bid was undercut on price and the decision to rebid had nothing to do with performance.”
In an interview, Orrin, the Merit co-founder, said the programs’ problems were due partly to states coming under pressure to limit costs and expecting companies to operate them at thin margins. “At a certain level, as states continue to squeeze on these budgets, it will be hard for anyone to deliver successfully,” he said. Some companies were contributing to this by making unrealistically low bids and were then having trouble delivering. “Some of the companies in this space are trying hard to chase the dragon,” he said.
Vanessa Grossl, who worked for ClassWallet before being elected last fall as a Republican state representative in Kentucky, calls the new mode of spending “Venmo government” and predicts it will improve with time. The novelty of the programs has “gotten some of them in trouble,” she said. “But you have to uncover those bugs in any new system. It’s worth the price of innovation and discovery for working through the bugs.”
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CorrectionJan. 30, 2025: This story inaccurately described the effort Tina Stevens spent 1,000 hours on. It took her that long to update her products on Odyssey’s online marketplace, not to build a separate website required by Odyssey.
This story has also been updated to include additional comment from Odyssey.
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