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Marco Rubio’s Criminally Negligent Child Credit Amendment to Tax Reform

Updated: Mar 24, 2023

By Ryan Ellis

This evening, the U.S. Senate voted along party lines to proceed to consideration of fundamental tax reform. This kicked off the filing of dozens of amendments by senators to make changes to the bill reported out of the Senate Finance Committee.

One of those amendments (two, actually) were filed by Senator Marco Rubio (R-Florida). They each bolster the child tax credit expansion already present in the base bill. In addition to doubling the child credit to $2000, the Rubio amendment(s) make the credit more defensibly refundable by tying it to the payroll tax, removing the marriage penalty in the credit’s phaseout, and indexing the credit to inflation. As a policy matter, I agree with these changes and they are perfectly sound, conservative, pro-family tax policy.

So what’s the problem?

In order to pay for this expansion of the child tax credit, Senator Rubio has attached what is perhaps the most politically inadvisable of all possible pay-fors. The base bill on the floor reduces the corporate income tax rate from 35 percent to 20 percent. This is the heart of the entire tax bill, the basic unifying force of the effort. Rubio’s amendment raises the corporate income tax rate from 20 percent to 22 percent. His supporters say he is cutting it from 35 to 22, but that’s not intellectually honest. It’s not current law that’s being amended on the Senate floor, but rather the Senate Finance Committee’s product. Rubio’s pay-for is only a pay-for because it raises the tax rate on that product.

This is really not smart for several reasons:

The corporate income tax hike is permanent, but the child tax credit expansions are temporary. If there is one thing that all Republicans should agree on, it’s that a permanent tax hike in order to temporarily change other tax provisions is a big no-no. What happens when the child tax credit expansion is up but the tax increase goes on forever? This is malpractice.

President Trump was forced to choose between a 20 percent corporate rate and Ivanka Trump. For the record, he chose the corporate rate at 20 percent. Any pay-for which forces the president to choose between his central policy initiative and the child tax credit expansion his daughter has been working on is doing it wrong.

The pay-for is a poison pill. Hiking the corporate income tax rate from the Senate Finance bill unifies almost all Republicans in opposition to Rubio’s underlying amendment. The Leadership, the Committee, the great majority of Senator Rubio’s Republican colleagues, all Republican tax policy experts, and the entire business community will unite against this pay-for. It’s already been opposed by Grover Norquist’s Americans for Tax Reform, and much more opposition can be expected in the coming days.

The Rubio amendment destroys the unity movement that was “Reform Conservatism.” A few years ago, policy experts got together and decided that the Republican tax movement needed to be more family-friendly, and they were (and are) correct. At the heart of their proposal was an idea to expand the child tax credit so that it was larger, applied to more families, was credited to the payroll tax, and was indexed to inflation.

A year or so later I wrote a booklet for the principal reform conservatism group, the Conservative Reform Network, called “Room to Grow: Tax Reform for Our Century.” In it, I proposed a marriage (so to speak) between the pro-growth and pro-family wings of the conservative movement. The pro-family wing would promise to promote smart child tax policies and avoid crossing bright lines on growth priorities. In turn, the growth wing would stop opposing pro-family tax policy and would focus on smarter, more targeted, more data-driven growth objectives.

The Rubio Amendment blows up that entire effort. One of the bright lines that you cannot cross is raising the top marginal tax rate on corporations in order to pay for pro-family tax policy. I had believed, until today, that this point was so obvious as to not need to be stated.

The amendment plays into the worst smears of the irresponsible elements in the pro-growth tax wing. The Wall Street Journal editorial board has been a stubborn defender of 1970s style pro-growth tax policy, even as the data and facts on the ground suggested that there was a new set of pro-growth initiatives they needed to pursue. Nonetheless, their refusenik opposition to one iota of pro-family tax policy was pretty humorous. They even eventually got themselves into such a lather as to propose repealing the existing child tax credit in order to pay for top rate tax cuts on rich wage earners. It was comical. They portrayed the pro-family wing as indifferent at best and hostile at worst to growth. And they were always dead wrong.

Until today.

Today, Senator Rubio offered an amendment to temporarily increase the child tax credit in exchange for a permanent increase in the corporate income tax rate. Today, for the first time ever, the WSJ ed board could accurately point to an amendment that did exactly the straw man smear they have been building up for many years. And that’s exactly what they did.

An amendment Chuck Schumer would love. Pretend for a moment that you are Senate Minority Leader Chuck Schumer (D-N.Y.) You want to offer an amendment to give those dastardly Republicans the headache of their lives. So you offer a plan to increase the tax credit for kids (heavily focused on low income scale voters) in exchange for a hike in the corporate tax rate. You watch gleefully as social conservatives over here fight with fiscal conservatives over there, and as businesses try to avoid getting mugged while still trying not to begrudge the pro-family Republicans.

Now imagine you’re Marco Rubio and you just did that to your own party.

If Schumer were smart, he would rally his 48 Democrat senators behind the Rubio amendment and look for a couple of more votes. Doing so would open the floodgates.

The amendment, if successful, would signal the end of business tax reform. The corporate rate, once broached, would become everyone’s pay-for. Rubio wants 22 for the child credit? Why not give Corker a percentage point for his trigger? Give Ron Johnson a percentage point to pay for further flow through business tax relief. Maybe a percentage point to take care of some base erosion issues. Want to solve the so-called “California problem” on SALT? Easy–just raise the rate another percentage point.

Do that enough, and you’re in the high 20s on your corporate rate. We would have been just as well off taking President Obama’s idea to reduce the corporate tax to 28 or 27 percent at that point.

The amendment has already poisoned the well for future pro-family tax reform. Going forward, I don’t know how any pro-family conservative tax policy is taken seriously by the rest of the conservative movement. No matter how well thought out, no matter how team ball the rhetoric, the rest of the coalition will view the family conservatives as selfish vultures, trying to implement their preferred policy at the expense of mugging the rest of them. After all, no one tried to (say) enact full business expensing and use a child tax credit repeal to pay for it. But the same courtesy was not applied when the shoe was on Marco Rubio’s foot.

There are far better ways to pay for it. I’ve been in touch with the Rubio staff today. They claim there was no other way to pay for their proposal. That’s obviously not true. In fact, I sent (at their request) no fewer than EIGHT pay-fors which would have passed muster. If I had more time, I could have come up with eight or ten more. No–this was deliberate. They wanted to raise taxes on corporations to…make some point? I’m still trying to figure it out myself.

The bottom line is that this was an embarrassing display by Senator Rubio, a true unforced error. As someone who proudly supported his bid for president, I am obviously deeply disappointed in him and in his staff.

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