The Rubio Tax Plan Asks for Grief

Rubioby Jon N. Hall    5/14/15
In March, Republican presidential candidate Senator Marco Rubio and Senator Mike Lee unveiled a tax reform plan that’s gotten mixed reviews. While there’s praise for their ideas on taxes for business, the reception for their proposed changes to the individual income tax isn’t so positive. Here are some short articles that express reservations about the Rubio-Lee tax reform ideas for the individual income tax.

In “Grading The Rubio-Lee Tax Reform Plan” on March 4 at Forbes, Dan Mitchell of the Cato Institute analyzes what’s wrong and what’s right with the plan. The “most disappointing feature of the plan” is its reduction of the top rate by only 4.6 percent. But more significantly, the new top rate would kick in at much lower thresholds: $75,000 for singles and $150,000 for marrieds. Currently, the top rate applies “only when income climbs above $400,000.” Mitchell concludes that “a significant number of taxpayers will face higher marginal tax rates.”

In “Some Thoughts about the Rubio-Lee Tax Plan” on March 11 at National Review, Veronique de Rugy notes that the plan raises “marginal tax rates on a significant number of middle-class and upper-middle class households.”

In “Where the Rubio Tax Plan Falls Short” on April 2 in the Wall Street Journal, Amity Shlaes and Matthew Denhart begin with this question: “Can a technical debate over tax plans trigger an identity crisis in the Republican Party?” They believe it can, and write: “It is no wonder that Democratic and liberal strategists have singled out the Rubio-Lee plan for praise.”

In “Marco Rubio tax plan challenges GOP orthodoxy” on April 9 at Politico, Ben White writes: “Rubio appears to be hoping his plan will appeal to Republican voters concerned about rising economic inequality and tired of getting beaten up in the general election over plans that Democrats say would hand massive tax cuts to the rich at the expense of the middle class.”

That would seem to confirm Shlaes-Denhart on leftwing praise for the Rubio plan. But Republicans are less concerned about “rising economic inequality” than about dwindling opportunity and stagnant economic growth. White, however, goes on to quote the supply-side guru at CNBC:

“This business side of the plan is pretty darn good and I like it,” said Larry Kudlow, a conservative economist who served in the Ronald Reagan administration. “The personal side of it is a mess and will be politically and economically indefensible and he is going to take tremendous criticism for it and my guess is he will have to back off it very fast.”

In “Marco Rubio’s Tax Plan Has Nothing to Do With Economic Growth” on April 13 at Townhall, John Tamny writes: “More than they’d like to admit, what they’re proposing would amount to a major tax increase for many Americans.”

In “Has Marco Rubio Finally Created a Tax Cut So Huge Republicans Don’t Like It?” on April 20 at New York magazine, Jonathan Chait writes that “Rubio’s slightly different problem is that his tax cut is so gargantuan that nobody in the party actually believes it.”

The “most unkindest cut of all” was delivered at The Blaze when Glenn Beck said that “his tax plan is so bad, Americans may as well ‘just vote for Barack Obama again.’” (At least Beck didn’t call Rubio a “progressive.”)

In any type of tax reform there will be trade-offs. Congress cannot change statutory tax rates and brackets without changing tax liabilities, i.e. what taxpayers actually pay to the IRS. Rubio’s plan changes both dramatically. There are only two rates in the plan: 35 percent and 15 percent. With the Rubio plan, there are winners and losers; some will be paying less than before and some more. With regard to his proposals for individual income tax rates and brackets, the Rubio plan is a recipe for resentment.

The Republican Party seems stuck on cutting tax rates as a solution to all ills. I’ve railed against tax rates mydamnself. (In fact, I even believe in a constitutional amendment to limit what government can take in taxation.) But if Republicans rally around cutting tax rates for the wealthy, the political reality is that the media flunkies of the Left will relentlessly beat up on the GOP with accusations of “tax cuts for the rich.”

In “Right-wing hostility to Marco Rubio’s tax plan shows the GOP is stuck in the past” on April 15 at This Week, James Pethokoukis opined: “If voters think the GOP’s big economic idea is tax cuts for rich people, the next American president will probably be another Democrat.”

Furthermore, the Left will have a field day if Republicans implement Rubio’s plan and there’s a shortfall in revenue. In a condescending article at the New York Times, we read that “a previous version of the plan … would have cost the government $2.4 trillion in lost revenues over 10 years, and this plan adds new deep tax cuts … that would cost trillions more.” Also, The New Republic ran two scathing articles on Rubio’s plan here and here. National Journal ran an article that’s not quite as nasty. But the upshot is that any cut in revenue will have the Left caterwauling about the “fraud” that is “trickle-down economics,” and how it has never worked.

Republicans need to avoid such grief. That’s why the first requirement of Republican tax reform must be that it not damage revenue, even in the first year(s) of implementation. The individual income tax is the largest source of revenue to the federal government. Republican tax reform needs to bring in at least as much revenue from the individual income tax as we currently do. Otherwise, gird your loins for leftwing flak.

Since Republicans captured the U.S. House there has been an historic drop in the deficit, from $1,299B in fiscal 2011 to $484B in 2014 (Table 1.1 of OMB’s historical tables). That’s an improvement of $815B in three years, and probably the record. Some $303B of that improvement (Table 2.1) is due to increased revenue from the individual income tax.

Despite the huge improvement, the 2014 deficit was still larger than any before the Pelosi-Reid Congress. Now that Republicans control both houses of Congress, they must not allow the deficit to go back up, especially by cutting revenue. In 2014, the individual income tax brought in $1.394T in revenue. So if a retroactive reform were enacted this year, $1.394T should be the minimum revenue target for the individual income tax for 2015.

The Rubio-Lee tax plan (PDF) contains several worthy ideas, but the changes to individual income tax rates and brackets aren’t among them. Senator Rubio is an attractive candidate, and I could easily vote for him. But the Republican Party cannot afford to be perceived as the party of “tax cuts for the rich” any longer. Let’s balance the budget again, gentlemen. After all, that’s what conservatives do.

Jon N. Hall is a programmer/analyst from Kansas City. • (1297 views)

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8 Responses to The Rubio Tax Plan Asks for Grief

  1. Tom Riehl TRiehl says:

    Rubio is leaving a lot of running room for the popular and effective ideas of Cruz and his ilk: abolish the IRS and pay a flat tax. No more rejiggering of the uncontrollable monstrosity known as the tax code. It is so filled with unknowable rewards for cronies, and is so generally complex it wastes an enormous amount of productivity just in attempts to comply. The appetite and atmosphere for sea-changes in the Federal structure is growing rapidly, I think.

  2. Timothy Lane says:

    One t note that the Democrats and the synoptic media (pretty much the same thing, of course) attacked GOP “tax cuts for the rich” in 1998 even though their tax cuts that year were means-tested so as not to apply to the rich. So we know in advance that they will call any tax cuts that, regardless of the facts. Still, it doesn’t help to make the demagoguery even easier.

    Lowering the top rate while also lowering the threshold for those who pay it (who would otherwise pay a much lower rate) is such a bad idea that it’s hard to see how even someone as stupid as a Republican senator could fail to see it. Lowering the top rate and paying for it with maximum levels for various deductions (especially state and local taxes, and probably also mortgage interest) is much better.

    The key to growth is probably business taxes, so reducing those (in return for removing special-interest deductions) is very important. One interesting idea that I’ve seen is allowing unincorporated small businesses to use the corporate rates when those are lower. Certainly it’s grossly unfair that large corporations pay lower tax rates than small local businesses — and since the Demagogues will in effect be supporting the status quo here, they can (and should) be attacked on that basis. (Whether the GOP is capable of doing that is another matter, unfortunately.)

  3. Rosalys says:

    Businesses don’t pay taxes. People pay taxes. Businesses just pass along their expenses (and taxes are an expense) in the cost of their products. Abolish the corporate and business taxes. It would be the single most effective action to encourage businesses gone overseas back home, and to reverse the the sliding economy.

    But this isn’t going to happen because what The Ruling Class is all about is ruling with an iron fist. Who cares about a strong economy as long as I’ve got mine?

    Very few are serious about cutting spending. Without cuts in spending any talk about tax cuts in the personal income tax doesn’t amount to a hill of beans! ALL federal taxes could be abolished and there wouldn’t even be a wrinkle in the spending because our gubmint will just ask the Federal Reserve for more. What is our national debt up to now? 18, 19 TRILLION? That would the official dollar amount. Only God Himself knows what the actual number is! It’s a ridiculous number! It CAN’T be paid back! It isn’t real money anyway. The debt should just be repudiated. Declare a year of jubilee. All debt wiped out. Start over afresh. That isn’t going to happen either. What will happen is that the whole stinking mess will come crashing down around us, because the current course is unsustainable. That could end up being for the good – unless we all end up in slavery in the aftermath.

    • Brad Nelson Brad Nelson says:

      Ditto to everything you said. This “tax reform” stuff from the Republicans becomes, in essence, “How stupid do you think I am?” And this has nothing to do with “Tax cuts for the rich,” which I’m fully for. It has to do with the fact that spending, not taxes, is our main problem. Yes, taxes are too high and the code is labyrinthine. But the problem is the spending, the debt, and the entitlement mentality created by all this stuff.

      Good luck walking that back. So these “brave” politicians obsess over the fine points of the tax code. And it’s just all a big dishonest game.

      • Timothy Lane says:

        The only way to reform the tax code is to repeal it and start from scratch. This should be done, but it won’t be, and anything else will simply make it even longer and less comprehensible.

        As for excessive spending, this is why they have to collect so much in taxes, so the latter cannot be solved without fixing the former.


      Absolutely. Establishment Republicans may support cutting some taxes, but they never seem to want to cut spending (see e.g. the records of Mike Huckabee and Jeb Bush in Arkansas and Florida respectively). And of course to cut social welfare spending, a President must make the moral for doing so – something Establishment Republicans are congenitally incapable of.

      • Brad Nelson Brad Nelson says:

        Good points, Nik. The moral argument, if there is to be reform, is essential. You should continue to remind us of this.

        There was an old beer commercial for Rainier beer, a regional brand and known for a time for its witty advertising, that seems apt. The punchline is when some nice modern-looking woman (from the 70’s) says to her husband when he asks her to get her a beer “Get it yourself, Bob.”

        No doubt this presages the modern feminist shtick. We see the floodgates beginning to open on criticizing men and elevating women….as well as the shtick of making women more man-like. Okay, it’s all in good fun and in the service of selling beer. But you see these attitudes coalescing in and around 1970’s Seattle/Tacoma/King County (by far the largest market for any product in Washington State).

        Perhaps when some male or female (or pick you gender) politician is able to say to the electorate when they want they free stuff “Get it yourself. Bob (or Betsy, especially Betsy)” you’ll begin to see the American enterprise system make a comeback.

        But the thing to remember about these politicians is they don’t tend to be rocket scientists. They tend to be the most glib, superficial, people-pleasing people on the planet (especially today). Good luck finding statesmen who can make a moral argument for anything. There may be a few, but they tend to be cast off as “wacko birds” by the amoral and ingrained establishment.

        Rush was reading from the latest Thomas Sowell article the other day. And perhaps no one has summed up the situation better than Dr. Sowell did in his article:

        You cannot take any people, of any color, and exempt them from the requirements of civilization — including work, behavioral standards, personal responsibility and all the other basic things that the clever intelligentsia disdain — without ruinous consequences to them and to society at large.

        Non-judgmental subsidies of counterproductive lifestyles are treating people as if they were livestock, to be fed and tended by others in a welfare state — and yet expecting them to develop as human beings have developed when facing the challenges of life themselves.

        For Leftist lurkers and other ne’er-do-wells who can’t think outside the box of race/class/gender and therefore would see this as a put-down of blacks, Sowell notes that Theodore Dalrymple in Life at the Bottom notes the same thing happening to the white underclass which has been relegated to the bottom by the do-gooders. The entitlement state can do this to anyone of any race, sex, gender (all 57), ethnicity, whatever.

        And we see the extremes of this in Britain or in Missouri or in Baltimore. But even more shocking is how pervasive this corruption is amongst the middle-class, or upper-classes for that matter. I’ve had many a conservation with supposed conservatives end with “But hands off my Social Security.” Or something equivalent to that. We can laugh at the goons and thugs in the black underclass created by the Democrat welfare state, but as John Donne wrote “Ask not whom the entitlement state corrupts, for it corrupts thee.”

        And politicians of both parties are hardly apt to stop feeding this beast. And beasts we are indeed becoming.

        • Timothy Lane says:

          I’m reminded of Rush Limbaugh’s comments in 1992 about the “pony-tail guy” at the town hall debate who wondered what the candidates would do for the people, “your children”. My thought was that a child that age still asking his parents what they would do for him should be sent to bed without his supper, but somehow I doubt any politician would ever say that. But Julia and Pajama Boy could both use some of that sort of mild discipline.

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