Republican Senators Marco Rubio and Mike Lee released their latest plan to overhaul the tax code Wednesday, calling for sweeping reform that would reduce rates, simplify the code and eliminate loopholes.
The plan won’t necessarily go anywhere — although a spokesman for House Ways and Means chairman Paul Ryan called the plan a “helpful contribution” to Republican efforts to reform the tax code. But it could prove valuable in Rubio’s likely 2016 bid.
“The tax code’s failures are manifold — impeding growth, discouraging investment, and restricting freedom on the business and the individual side — but they are all rooted in the same fundamental unfairness and inequity of a government that picks winners and losers,” Rubio and Lee wrote in a Wall Street Journal op-ed.
They would reduce the corporate rate from 35 percent to 25 percent, and tax income at just two rates — 15 percent for single incomes up to $75,000 and 35 percent for higher incomes.
On the individual side, the plan would get rid of all deductions, except mortgage interest and charitable giving, and would more than triple the child tax credit to a maximum of $3,500.
On the corporate side, the plan eliminates corporate loopholes, and gets rid of capital gains and dividends taxes. And businesses would no longer have to pay taxes in the U.S. for profit they earn overseas.
They characterize the plan as “pro-growth” and “pro-family,” and stress fairness and economic freedom as the motivation for the reforms, as opposed to strictly economic growth. And it could cost the government revenue — The Tax Policy Center estimated that a similar plan released last year would add $2.4 trillion to the deficit over 10 years.
Rubio addressed the cost of the plan in a press conference Wednesday, saying it should be considered in the context of other potential reforms to cut government spending, and the economic growth it would lead to, and reiterating the importance of economic freedom on principle.
“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 to people,” Rubio said.
The expanded child tax credit is particularly expensive, and conservatives have argued that money should go to further lowering tax rates, not to a credit that hasn’t been proven to drive economic growth. Lee and Rubio argue it’s crucial, because parents unfairly pay twice for retirement benefits — once through their payroll taxes and twice through paying to raise children who will later pay into the system.
“Growth is a function of economic freedom and we can’t pursue growth at the expense of freedom, fairness, and choice,” Lee told The Daily Caller News Foundation. “Our overall plan is one of the most pro-growth plans that has been proposed. The increased child tax credit fixes an inequity in the law that penalizes parents for having kids and investing in the next generation of productive taxpayers.”
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