You can’t start tax reform as a Republican by pitting families, individuals and corporations against each other. But that’s exactly what the Rubio-Lee plan does by favoring one group over the other, especially when it comes to corporations. I like the flat-tax, or even better a consumption tax. Amity Shlaes and Matthew Denhart point out in the WSJ:
The nonpartisan Tax Foundation recently estimated that Rubio-Lee would increase economic growth so that by 2025 the economy would be 15% larger than otherwise, almost entirely due to business tax cuts. The effect of the child credit on growth is reckoned at zero. Dan Mitchell of the Cato Institute notes that if Rubio-Lee dropped all the preferences it contains, old and new, the plan could drop its top income-tax rate to 20% or lower.
Growth fueled by corporate tax cuts may suffice to offset costly items like the child credit on paper. But the Tax Foundation’s scoring doesn’t capture the cost of resentment between groups, or that of a tax code that emphasizes families over individuals. Rubio-Lee does not make enough effort to encourage that group of top income earners to strive.
A Republican plan that emphasizes “fairness” to this extent risks establishing a trend. Rubio-Lee sets the stage for greater tax gifts to particular groups in the future, with eventual hikes to the top marginal rate. If the self-styled party of enterprise does not emphasize the individual, no one will.
The overall seriousness of the Rubio-Lee plan is commendable. But to make the plan worth endorsing requires a major change: scrapping the child credit and replicating the business side cuts on the individual side.
