Former Florida Gov. Jeb Bush has been pressed since day one of his proto-campaign to explain how he’d be a different president than his brother or father. But the press may be interrogating the wrong GOP presidential hopeful -- when it comes to economic policy, Sen. Marco Rubio is moving closer to reviving George W. Bush’s agenda than anyone else in the field.
On Wednesday, Rubio and Utah Sen. Mike Lee unveiled the blueprint for their long-awaited tax reform plan, which would cut taxes for individuals, families, businesses, and investors while eliminating a swath of deductions. Individual tax rates would be compressed into two brackets of 15% and 35% while the top corporate tax rate would shrink to 25% from 35%. The centerpiece of the plan, and a potential model for GOP policy in the age of stagnant wages, is a pricey new $2,500-per-child tax credit. It will undoubtedly play a central part in a Rubio presidential campaign should the Florida lawmaker take the plunge.
“No matter what I run for, whether it’s the Senate or presidency, of course this is going to be part of our platform,” Rubio said. “You think I’m going to come up with a second tax plan?”
There’s only one catch: Rubio’s plan would likely add trillions and trillions of dollars to the deficit. Sound familiar?
Rubio’s proposal represents a possible answer to an intractable contradiction Republicans have faced in the Obama era. On the one hand, the GOP has long stood for lower taxes, especially for the rich. On the other hand, a core issue driving the tea party is reducing the deficit. The more you address the first goal, the more you make the second one harder.
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Recent efforts by Republicans to address the problem have not gone well. Mitt Romney pitched a revenue-neutral tax overhaul that didn’t raise taxes on the middle class or lower them for the rich in 2012, but estimates by outside groups found the numbers didn’t add up. Then-Rep. Dave Camp took another stab at politically friendly, revenue-neutral reform in 2014, but his plan died almost immediately when the right slammed it for taxing big banks.
Rather than continuing to jam square pegs into a round box, Rubio and Lee are giving up on the “revenue-neutral” part, freeing them up to simultaneously slash taxes for rich and non-rich alike. It’s the same playbook George W. Bush used in 2000, only this time Rubio doesn’t have a big federal surplus to work with.
Will McBride, chief economist for the conservative Tax Foundation, got an early look at the plan and ran the numbers. According to static scoring, the type used by the non-partisan Congressional Budget Office on tax proposals, Rubio and Lee’s plan would reduce government revenues by a whopping $414 billion annually after a ten-year adjustment period. A previous version of Lee’s plan with many similarities was pegged by the Tax Policy Center as adding $2.4 trillion to the deficit over a ten-year window.
Speaking to reporters on Wednesday, Rubio stressed that he preferred analysts use “dynamic” scoring that would take into account the explosive growth he claims his business tax cuts would unleash. By this measure, McBride and the Tax Foundation put the change in revenue at a net positive of $94 billion a year once its effects start gradually kicking in.
Then there’s the question of who benefits. While a further analysis of which income brackets profit the most is still forthcoming, McBride said the bulk of the gains – as they did under Bush’s 2001 and 2003 cuts -- would accrue to the wealthy. “As businesses build out capital stock, pay workers more, see more productivity, those benefits accrue to all income brackets fairly evenly,” McBride said. “But it’s still the case that there’s more of a benefit in the top percentiles even in the dynamic distribution.”
Pressed by a reporter on how his tax cuts would be distributed, Rubio said he “wouldn’t characterize it as a massive tax cut for wealthy individuals.” “I think it’s a significant tax cut for the vast majority of Americans,” he said.
Democrats and many mainstream economists reject the theory that supply side cuts aimed at the top help pay for themselves or trickle down to the poor and middle class, setting up a heated debate for 2016. Conservatives made (and continue to make) similar arguments about Bush 43’s tax cuts, but the surplus Bush inherited from President Clinton turned into record deficits, incomes at the top surged while stagnating for the middle class, and the economy is still recovering from the Great Recession.
While Rubio wants credit for eventually unleashing a hypothetical Rubio Boom, he is not claiming that his tax cut pays for itself. He stressed that the government would also need major changes to its priciest programs, namely Medicare and Social Security, to rein in debt. “We need entitlement reforms in America to save Medicare and Social Security and to bring our long-term debt under control,” he said. “But you cannot cut your way out of our predicament, you need growth to accompany it.”
Rubio is definitely showing some political courage in releasing his plan. It’s not easy putting out a detailed white paper ahead of the field and setting yourself up for the inevitable scrutiny and attacks it entails. Already Democrats are bashing Rubio for pushing some middle class taxpayers into the higher 35% bracket and removing popular tax deductions on things like student loan interest payments.
“Rubio’s tax plan shifts the burden onto working Americans and those hurting the most while propping up the very rich and offering tax breaks for corporations,” Democratic National Committee chairwoman Debbie Wasserman-Schultz said in a statement. “To top it off, Rubio’s plan would increase the annual deficit.”
There’s another political danger. While Rubio may be able to offer some broad middle class tax benefits, Democrats have an advantage in that they’re comfortable raising taxes on the wealthy, giving them a bigger pool of cash to propose middle and working class benefits of their own. That’s exactly what both Obama and Congressional Democratic leaders have proposed in recent weeks and it’s easy to imagine Hillary Clinton taking up the charge in 2016.
At the very least, Rubio is grappling with the entrenched party problems that helped knock out Romney in 2012. It will be interesting to see whether his rivals, regardless of their last name, follow the siren song of neo-Bushism as well.