While Hillary Clinton was meeting with voters in Iowa on her second full day as a presidential candidate, Marco Rubio spent part of his discussing a tax policy white paper at a Washington think tank. The newly declared candidate joined with Utah Republican Mike Lee at the Heritage Foundation to talk about their proposal to reform the tax code, which has already become a point of contention in Rubio's nascent presidential campaign.
The plan Rubio and Lee have introduced would accomplish a few big things: simplifying the income tax code into two brackets at 15 percent and 35 percent; eliminating most deductions except those for mortgage interest and charitable contributions; consolidate business tax rates to one rate, 25 percent; and an increase to the child tax credit to $2,500 per child.
There are plenty lines of attack against the plan from the left, but the proposal has earned criticism from the right, as well. The Wall Street Journal editorial page, which largely shares the Florida Republican’s views on foreign policy and immigration, greeted Rubio’s entrance to the race with some skepticism. The paper's Tuesday editorial suggested the young Republican’s tax plan would be a departure from GOP standard-bearer Ronald Reagan.
Here’s the Journal:
With this proposal, Senator Rubio makes himself the party’s most visible ally of the “new” Republican idea that the Reagan tax-cutting agenda is a political dead end, and that the party now must redistribute revenue directly to middle-class families. It’s not clear how Candidate Rubio would hope to win a tax-credit bidding war with Hillary Clinton, who’d see and raise on the size of the credit and make it refundable to non-taxpayers. The Rubio tax credit looks like an obvious political gambit with no economic growth payoff.
Rubio took issue with that characterization at Heritage. “This is not a redistribution because this money doesn’t belong to the government in the first place,” he said. “What we recognize is that in our existing tax code, there is a penalty for those who are raising children.”
It’s an argument Lee has made numerous times: The tax code penalizes Americans who choose to have children, since the primary cost of raising those children (who are, in the eyes of the government, future taxpayers) falls on the parents. “Those who look at it as a bad thing try to describe the child tax credit as a subsidy, as a special-interest giveaway. It’s not. This is an offset to an existing penalty, to an inequity that exists under the current system,” Lee said at Heritage.
Some conservatives see tax credits as new, unpaid spending, preferring tax deductions as a way to reduce the burden on your average taxpayer. The political problem is there aren't a lot of people who can benefit from more or bigger tax deductions. Most middle-class Americans don’t itemize deductions on their tax returns, since the complexity of the code usually requires the services of a tax professional. The Tax Foundation estimated in 2010 that 70 percent of taxpayers would choose the standard deduction instead of itemizing. On the other hand, Lee has argued, the tax credit allows for any taxpaying parent to keep more money, even those who pay payroll taxes but don't make enough to pay income tax.
At Heritage, Rubio defended the credits in more philosophical terms. “One view is the government is entitled to a hundred percent of your money, and we’ll let you know how much of it you can keep. And the other view is, we’re entitled to a hundred percent of our money, but we understand we have to have a government, and we’re going to let you know how much we’re willing to send you,” Rubio said. “That’s the view that I adopt, the latter.”
Expect to hear that argument at a Republican primary debate stage soon.