"We believe that America’s best days are still ahead. But we also recognize that restoring the shared prosperity that comes from a strong economy requires reforming the most antiquated and dysfunctional government policies, beginning with the federal tax system."

-Senators Marco Rubio and Mike Lee 

Finally, something we can all agree on. 

In their joint op-ed in this morning's Wall Street Journal, the two Republican senators proposed a new tax plan and argued that our current federal tax structure is broken, its problems "rooted in the same fundamental unfairness and inequity of a government that picks winners and losers."

Again, we here at the Roosevelt Institute welcome this realization. For too long, our tax code has helped the few at the expense of the many. Unfortunately, an analysis of their proposed solutions shows that the senators have come out on the wrong side of this argument. 

First, they propose lowering the top corporate tax rate to 25 percent. This would be a step worth discussing if not for the fact that, with offshore tax havens and a wealth of other tax benefits, America's largest corporations currently pay an effective rate of just 12.6 percent. In the words of Roosevelt Institute Chief Economist Joseph Stiglitz, it would seem that the problem is not double taxation, but no taxation.

The senators then argue that, in order to incentivize investment, they would make all capital expenditures 100 percent tax-deductible, suggesting that taxes have squeezed corporations out of the investment business. But if this is the case, then how do we explain the $2 trillion currently being held abroad by America's largest corporations? And what about the enormous sums that companies like Apple and Home Depot are spending on buybacks to enrich investors? 

In fact, new research from Roosevelt Institute Fellow J.W. Mason shows us that the link between corporate cash flow and productive investment has been all but severed since the shareholder revolution of the 1980s. Shareholders now pocket an increasingly large portion of corporate earnings and borrowing that would have once gone to capital investments, job creation, or raising workers’ pay. Given these facts, as well as the current level of historically high profts, it is clear that corporate investment is not suffering from lack of funding, and that more spending on corporate welfare is the wrong way to go.

Lee and Rubio suggest that corporate taxes drive American industries abroad. This is absolutely true: Corporations want to benefit from American security, infrastructure, and human capital, but they don't want to pay their share to maintain those invaluable assets, so they shelter themselves in tax havens like Ireland. The problem, from our point of view, is not, as Rubio and Lee suggest, that the tax code taxes corporations (indeed, that is what a tax code exists to do); the problem is that it allows wealthy corporations to avoid those taxes. 

We need policies that will ensure corporations contribute like the rest of us, not ones that will commit more public money to private enterprise. 

The senators state that their plan is guided by the principles of fairness, freedom, and growth. This raises the question: In whose mind is it fair to spend hundreds of billions of dollars on wealthy corporations, while Americans drive on pothole-pocked roads and send their children to overcrowded schools to learn from underpaid teachers?

For the individual income tax, Rubio and Lee propose reducing the number of brackets to two -- one at 15 percent and one at 35 percent. Even though they have been greatly reduced since the 1980s, lowering rates for middle-income earners is worth discussing. The far more significant part of this proposal, however, is the 11 percent tax break for top income earners, which would further reduce the amount of public funds available for things like roads and schools, and which would further tip our economic balance toward the wealthy.

The senators would likely argue that this tax break will stimulate productive spending, but trickle-down economics did not work under Reagan and will not work now.

Toward the end of their op-ed, the authors posit a series of pro-family tax reforms, like tax credits for children and tax breaks for couples filing jointly. These policies are rooted in a belief that families with married parents are more economically stable and productive than single-parent families. Again, this may be a point worth debating, but these miniscule incentives are scarcely more than lip service to the American middle class, which this plan largely forsakes in favor of more tax cuts for large corporations and the wealthy. 

More generally, Rubio and Lee frame their entire plan as a benefit to average Americans, but do this while glossing over policies that will only continue our current trend of supporting the wealthy at the expense of the country as a whole. The Stiglitz tax reform plan, on the other hand, offers a blueprint for a tax code that would bolster the middle class while driving growth and opportunity. 

Now that we’ve all agreed on the problem, we should look to solutions that economists tell us actually work.

Eric Bernstein is a Program Associate at the Roosevelt Institute.

Contact – DNC Press

DNC Chair Wasserman Schultz’s Statement on Marco Rubio’s Tax Proposal Plan

Washington, DC – Today Marco Rubio released his tax proposal.  Instead of offering anything new, the Rubio plan calls for more of the same failed, trickle-down fiscal policies of which the American people have grown tired and deserve better. In response to Rubio’s plan, DNC Chairwoman Debbie Wasserman Schultz issued the following statement:

“At every opportunity, Marco Rubio jumps at the chance to pander to the extreme base of the Republican Party.  Rubio’s tax plan shifts the burden onto working Americans and those hurting the most while propping up the very rich and offering tax breaks for corporations.  To top it off, Rubio’s plan would increase the annual deficit.  Rather than propose a serious fiscal plan that aims to grow the middle class and expand opportunity for all Americans, Marco Rubio has assembled what amounts to a GOP donor wish list.  Marco Rubio isn’t fooling anyone.  If he seriously intends to be a fresh face for the Republican Party, then Rubio needs to go back to the drawing board and try again.”

Here are a few examples of how the Rubio tax plan would prop up corporations and the very rich at the expense of working Americans and those hurting the most:

• Cuts taxes for those at the very top while raising them for people at the bottom
• Calls for tax breaks for corporations
• Eliminates taxes on capital gains
• Previewing his plan in front of Club for Growth, Rubio stated “If I got to start our country over from scratch, I would either have a flat tax or a consumption tax.”

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