Lee/Rubio Tax Plan: All This and More!

Aha! “>says Jonathan Chait. The new Lee-Rubio tax proposal that GOP “reformicons” are embracing exposes their surrender to traditional supply-side Republican tax nostrums. Yes, it includes a super-sized child tax credit that is refundable up to the level of payroll tax payments (e.g., it’s not “welfare,” in the sense of exceeding total federal tax payments). And it doesn’t focus on reducing upper-income tax rates as much as the usual Republican plans.

It more than makes up for those features, however, by including the total abolition of taxes on capital gains and estates, along with lower taxation of business income. And it generates big deficits which will presumably have to be addressed via either draconian spending cuts or supply-side “dynamic scoring” pixie dust. So Chait is right: this isn’t the revolution against supply-side economics reformicons were, according to some accounts, supposed to be waging.

But here’s the thing: the reformicons don’t deny liberal descriptions of Lee/Rubio; they simply deny it’s a “surrender:” it’s part of the plan all along, because reformicons are supply-siders, too!
Here’s Ramesh Ponnuru, perhaps the least orthodox of reformicons when it comes to fiscal and monetary policy, being very direct on this point:

Some news coverage has treated this debate as a struggle between “supply-siders” and other conservatives. That’s a mistake. Both sides consider themselves supply-siders. Both sides, that is, believe that tax rates affect the amount of labor and capital supplied to an economy. They think lower tax rates would improve incentives to work, save and invest, and thus promote long-term economic growth.

So, argues Ponnuru, the Lee/Rubio plan is simply advancing multiple prongs of conservative thinking on taxes.

Ponnuru’s National Review colleague and fellow reformicon Reihan Salam is a bit more candid in acknowledging the deal-making side of Lee/Rubio:

[W]hat’s really important about Lee-Rubio is not the specific tax rates it proposes but rather the basic political bargain it represents: conservatives should strive to make the tax code more growth-friendly, yet they should also seek middle-class tax relief. Conservatives don’t have to be persuaded of the virtues of a more growth-friendly code. They’re not put off by the idea of helping virtually everyone, including the already-rich, accumulate wealth. The case for middle-class tax relief, however, has proven more controversial, particularly in the form of the expanded child credit that is so central to Lee-Rubio’s political appeal. What conservative critics of the expanded child credit have missed is its potential role in restraining the growth of government. While raising taxes on high-income households is, whether conservatives like it or not, quite popular, raising them on middle-income households is profoundly unpopular. To put it crudely, tax cuts that primarily benefit small numbers of high-earners are always vulnerable to populists campaigning for their reversal. Tax cuts that primarily benefit large numbers of middle-earners, in contrast, are very hard to reverse, especially by those same populists. If your goal is to make it more difficult for future lawmakers to greatly increase federal expenditures, your best bet is to push for middle-class tax relief, a case Ramesh made quite convincingly in the pages of the Weekly Standard back in 2013. So Lee-Rubio is best understood not as a bill that Congress ought to pass tomorrow but as a blueprint for how conservatives should connect tax reform to middle-class aspiration.

Well, this last part is pretty convoluted, but you get the basic idea: Lee/Rubio is a foot in the door for the middle-class agenda people like Salam, his “Sam’s Club Republicans” co-author Ross Douthat, Ponnuru, and other reformicons have been pushing all along. But it’s not much more than a foot in the door. So while I’m not sure this is a sign of “surrender” for reformicons, it’s definitely a sign of how very far they have to go and what they have to concede to have any influence in Republican tax policy. And this is from the proto-presidential candidate most identified with these guys: Marco Rubio. As Chait notes, the other candidates appear much less inclined to change the supply-side gospel at all, unless it’s to go over the brink into some sort of consumption tax that really screw poor people and relieves income from capital of all taxation.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.