Quote of the Day:
Perhaps no function of the U.S. government is more antiquated and dysfunctional than its tax system, so we are joining together to propose a federal tax-reform plan that will remove obstacles to investment, innovation, growth and opportunity.
–Senators Mike Lee and Marco Rubio in today’s Wall Street Journal
Observing that our current tax code taxes too much and unfairly and “conspires with our outmoded welfare system to trap poor families in poverty,” the senators are proposing an overhaul that would create a simpler tax system and lower rates.
Rubio and Lee propose to simplify tax brackets (15 percent and 35 percent) and reform the system of deductions, which disproportionately help the affluent. The senators also propose to end the marriage penalty, which makes taxes for a married couple higher than if they had filed as individuals.
Parents are in a sense taxed double, the senators argue—they pay payroll taxes, which go to fund our entitlement system, and they also take on the expense of bringing up the next generation who will eventually fund Social Security and Medicare.
Rubio and Lee write:
This hidden, double burden on parents isn't offset anywhere else in the system, and so true conservative tax reform needs to account for it. Children aren't consumer goods—they are investments parents make in their futures, and in the future of America, and therefore deserve to be treated as such in our tax code.
Our proposal would account for this and level the playing field for working parents by augmenting the current child tax credit of $1,000 with an additional $2,500 credit, applicable against income taxes and payroll taxes—i.e., the taxes that most burden lower- and middle-income families. The credit would not phase out, and would be refundable against income tax and employer and employee payroll tax liability.
The Lee-Rubio plan would also reform the Earned Income Tax Credit so that lower-income workers who receive a raise would not immediately see that increase eaten up by higher taxes.
The corporate tax rate would be cut to below the current 35 percent and brought more in line with global levels—a better way to halt the flow of corporations to more beneficial climbs.
While some prefer a flat or fair tax, the Lee Rubio proposals would be a vast improvement over what we have now.
It addresses two points we stress in IWF's new book, Lean Together–the need for policies that allow families to flourish and redesigning the safety net so that it doesn't become a permanent trap.