Rubio has new spin on tax plan
Florida senator would give tax credit to families with children, an idea which generated debate in GOP circles.
WASHINGTON — Ever since 1981, when Ronald Reagan signed a tax-reform law that reversed a halfcentury of climbing rates, the pursuit of ever-lower income tax brackets has been the prime goal of Republican economic policy.
Revising that party orthodoxy has now become a main exhibit for Sen. Marco Rubio’s claim to be a “new generation” Republican.
The 43-year-old senator from Florida, who declared “yesterday is over” as he announced his candidacy last month, has proposed a tax plan that puts less emphasis on lowering the top tax rate and instead offers a large new credit for families with children, which he says will help working households.
The plan, the first substantial tax proposal of the 2016 presidential campaign, already has generated debate within Republican policy circles. The party’s tax purists have not been entirely pleased. Some have hurled the ultimate insult for a Republican, comparing Rubio’s $2,500 child tax credit, which more than doubles the current $1,000 allowance, to one proposed by President Barack Obama. Others simply called the tax plan “underwhelming.”
GOP critics say that the top rate in Rubio’s plan, 35 percent compared with the current 39.6 percent, is too high. In 2012, Mitt Romney, the Republican presidential nominee, proposed lowering the top rate to 28 percent. Some upper-income taxpayers without children could see a tax increase under the Rubio plan, critics note.
Rubio insists his plan is crucial to reviving economic growth. Child-rearing contributes to society in the form of future taxpayers who will fuel economic growth, “not to mention our future Americans, our future leaders,” Rubio, a father of four, said at a conservative forum last week.
Former Florida Gov. Jeb Bush took a swipe at Rubio’s plan in recent remarks to the same conservative forum, sponsored by the National Review. His brother, former President George W. Bush, boosted the child tax credit to its current level, but rather than increase it further, Jeb Bush said he would prefer to try to “lower the rates down as (far as) possible.”
On the other side, Democrats say that Rubio’s plan would reduce government revenue by far too much. By trying to expand the child credit while still reducing top rates and including other tax cuts that would directly benefit wealthy taxpayers, Rubio ended up with a plan that carries a price tag of $4 trillion over a decade, according to an analysis by the Tax Foundation, a nonpartisan group based in Washington.
As GOP candidates’ tax plans emerge, discussion on the party’s right flank is focused on Sen. Ted Cruz’s pursuit of a flat tax and his promise to abolish the Internal Revenue Service.
Cruz said at an event last week that he wants a tax code simple enough that “every American can fill out their taxes on a postcard.”
But many party activists believe they need to do something to improve the GOP’s image as the party of the rich, a desire that has muted criticism of Rubio’s plan.
Republicans have done particularly badly with women voters, among whom a tax cut for children could be popular, some strategists argue.
“It’s very attractive politically — and bullet proof against liberal criticism that it’s just for rich people,” said Grover Norquist, president of Americans for Tax Reform, who had initially been skeptical of Rubio’s plan.
The wealthy, however, would still do well under Rubio’s proposal. He would eliminate taxes on capital gains, dividends or investments — types of income more often received by the rich than those in the middle or lower-end of the income spectrum.
Under Rubio’s plan, individuals could continue to deduct mortgage interest and charitable giving, but other long-standing tax credits could be eliminated as a way to offset some of the costs.
One group of taxpayers could see their income taxes rise under Rubio’s proposal: higher-income workers without kids.
Because Rubio’s plan simplifies the individual code to just two brackets — 35 percent and 15 percent — couples earning more than $150,000 (or $75,000 for singles) who were previously in a middle bracket would likely be bumped to the higher 35 percent rate.
Rubio’s backers, however, counter that even those families could benefit from other parts of the plan, such as the elimination of taxes on capital gains, dividend and interest income.
“The question is, when he actually fills in the details of his proposal, how far down the road is he going to go?” said Howard Gleckman, a senior fellow at the nonpartisan Tax Policy Center. “That’s a question we can’t really answer yet.”
“It’s interesting,” Gleckman added, that Rubio is arguing that “you ought to have a government subsidy” for raising children. “He’s trying to position himself as a different kind of Republican.”