Last year, Marco Rubio defined himself as the Republican presidential candidate who was primarily concerned with the middle class. He gave speeches about poverty. He gave speeches about the struggles of the middle class. It wasn’t working terribly well. So Rubio has updated his tax plan, the old version of which gave a big tax cut to the rich, so it now gives an absolutely gargantuan tax cut to the rich. The new Rubio is hobnobbing with members of the Koch family and other billionaires, and, reports Eliana Johnson, they really like the cut of his jib:
At the American Enterprise Institute’s annual donor retreat in Sea Island, Ga., one attendee says Rubio got rave reviews from a crowd that included several billionaires. And in late January, the senator impressed the libertarian-leaning crowd at the Koch brothers’ donor conference in Palm Springs, Calif., and came out on top of an informal straw poll conducted there.
Rubio “now has many of the party’s top donors looking at him in a way they weren’t even a month ago,” she reports. Johnson credits “his knowledgeable presentations and obvious political talent,” though it is also possible Rubio’s new promise to abolish all taxes on capital gains, dividends, and estates may have enhanced his appeal.
Because Rubio so heavily emphasized the working-class-hero themes for so long, his image (outside of his tickled donors) has not quite caught up to the current reality. Josh Barro sharply dissects another new feature of Rubio’s plan — a huge new tax cut for business income. This would allow individuals, especially rich ones with good accountants, to reap enormous tax cuts by reclassifying their earnings as business income. It would also add to the tax code’s complexity, despite Rubio’s putative intention of simplifying it.
However, Barro may be understating just how radical Rubio’s proposal is. He calls it the “Puppies and Rainbows Tax Plan,” because “it’s full of things everybody likes, at least on the Republican side: family tax cuts that will make it easier to buy the children a puppy, and capital tax cuts that chase a pot of capital investment gold at the end of the rainbow.” One problem is that the puppy element of Rubio’s plan is much less cuddly than he has made it out to be. As Chuck Marr explains, Rubio’s plan, while sketchy on the details, would offer nothing to millions of low-income workers and would actually raise taxes on many more:
- Lee-Rubio creates a new $2,500 Child Tax Credit to complement the current child credit. TF says the new credit “cuts taxes for most taxpayers.” But it would exclude many working-poor families. The new credit is refundable only up to the sum of total income and payroll taxes after applying all other credits, such as the Earned Income Tax Credit (EITC) and existing Child Tax Credit. After these credits, most low-income working families will have no net federal income and payroll tax liability and consequently won’t qualify for the new CTC. In other words, its design excludes most low-income working families.
- Lee-Rubio also replaces the standard deduction and personal exemption with a new tax credit (and eliminates the head of household filing status). TF states that this credit would be “fully refundable,” though the Lee-Rubio document itself doesn’t say one way or the other. Let’s assume it is; if so, the new credit would benefit many low-income families. Yet a substantial number of other low-income families would lose from this change, because the new credit would replace other current provisions that are worth more for them. To return to the example family we used in our previous post, a mother with two children working full-time at the minimum wage would lose $25 in 2018 from this change. Some low-income workers would lose substantially more than this amount, while other low-income workers could get a significant boost from this change, assuming the credit is indeed fully refundable.
- More important, Lee-Rubio would let a key provision of the current Child Tax Credit expire after 2017, causing millions of low-income working families to lose all or part of their credit.
So Rubio’s plan will give some working-class taxpayers puppies. But others will get no puppy. And many will have their existing puppy sent away to go live on a farm, where it will have plenty of space to run and play.
Barro likewise assumes that, if elected, fiscal constraints would force Rubio to choose between the rainbows and the puppies (to the extent the latter exist). “When it becomes clear that a budget constraint exists,” he writes, “and that a new Republican administration can hand out only so many hundreds of billions of dollars in tax cuts, who will win: the puppy lobby or the rainbow lobby?”
But why should we assume that budget constraints exist? Rubio — who, if anything, represents the centrist end of his party’s presidential field — feels liberated enough to propose a tax cut that would lose $4 trillion or so over a decade. (The full plan’s cost has not been measured by any credible outfit — which is to say, it has been measured by the Tax Foundation.) That is a sign the Republican Party is comfortable passing a tax cut of that magnitude. Likewise, when George W. Bush ran on a $1.6 trillion tax cut in 2000, moderate analysts called it irresponsible, but they tried to pass it anyway. (And then, after the budget outlook collapsed shortly thereafter, went on to pass a second tax cut in 2003.) If Republicans were uncomfortable with the size or scope of Rubio’s tax cut, he wouldn’t be proposing it.
Rubio has certainly given no indication that he cares about losing revenue. He’s begun spouting the kind of fiscal gibberish that harkens back to the Bush years. “I’ve never believed that tax reform by itself should pay for itself, because that basically argues that the money belongs to the government and not the people,” Rubio said recently. To recap: Rubio believes that anybody who thinks revenue needs to bear some relationship to expenditures believes “the money belongs to the government, not the people.” Why even have any taxes? Let the people keep it all, then!
He proceeds to argue, “Let’s say we raise taxes in this plan today. You still wouldn’t bring the debt under control. You still you have to do the spending piece of it.” So, according to Rubio, we can’t bring the debt under control through taxes alone. (This is not actually true, but never mind.) Therefore, Rubio reasons, there’s no point in raising taxes at all, or even holding them at current levels. Might as well pass a huge tax cut. I can’t reach my ideal weight through eating less alone, so my new plan is to start gorging on Ben & Jerry’s every day.
Recently, Fox News personality Neil Cavuto asked Rubio if perhaps eliminating all taxes on wealth completely might create a wee political liability for him in the general election. Rubio replied, “Well, I always laugh [because] the majority of people who accuse me of that happen to be millionaires who are lecturing me, the son of a bartender and a maid, about the plight of the middle class.” Really? A majority of the people who point out the distributional implications of Rubio’s tax plan are, personally, millionaires? How did he arrive at that figure? Most of the tax-policy wonks I know don’t pull that kind of money. In any case, even if 100 percent of the people who pointed out that Rubio’s plan creates a massive windfall for wealthy people also happened to be wealthy, it would not make their point any less true.
If Rubio really is actually in the habit of treating millionaires with the level of contempt he suggested, his boffo performance at the AEI donor retreat at Sea Island, Georgia, is all the more impressive.
