The Republican Party has become the party of ideas again. You can see it in the new tax reform plan put out by Tea Party Sens. Mike Lee (Utah) and Marco Rubio (Fla.).
Their plan would simplify the income tax system, setting just two rates: 15 percent and 35 percent. More importantly, it would add a $2,500 child tax credit, refundable against both income and payroll taxes, to the existing $1,000 child tax credit. This means that even families that don't pay income taxes, but do pay payroll taxes (i.e. families who work), would benefit from the tax credit.
The plan also reforms corporate income taxes. The details are a bit too complex to get into here, but as Reihan Salam explains, this part is also very clever and well thought out, and would address the problem of crony capitalism.
Now, why is any of this a big deal?
It's a big deal, first of all, from a political perspective. Here are two Tea Party senators, one of whom is thought to be a strong candidate for the GOP's presidential nomination, saying that the Republican Party should stop focusing on cutting top income tax rates and instead focus on helping middle-class families. The plan cuts tax rates a little bit, but most of its "bang" is for middle-class families.
It's very important for the GOP to realize that the way to national electoral success is to be seen as on the side of the middle class. And that starts with bread-and-butter issues like taxes.
But Rubio and Lee's tax plan is also a big deal because expanding the child tax credit tackles a whole set of interlocking issues that are plaguing the country and, unlike heavy-handed progressive solutions, does so in a smart way.
America's lower and middle class suffers from a host of connected issues, especially lower social mobility, stagnating wages, and the decline of the family. The latter is of fundamental importance, since strong families provide an enormous host of economic, social, and cultural benefits, ranging from an inherent safety net, economies of scale, and especially incubating human capital — a.k.a. children, who are the people who are going to make the economy run in the future.
It's not enough to point to cultural changes, as too many conservatives do, as the sole cause of the decline of the family. There are also economic reasons. It's become harder to get married and stay married because it's become more expensive to do so — more expensive to have kids, and more expensive to move into the kind of stable middle-class jobs that so many Americans feel is a necessary prerequisite to founding a household.
A child tax credit obviously isn't a cure-all; but it's equally true that tax policy shapes our incentives, and affects our behavior. And a child tax credit that is not only expanded but refundable against income and payroll taxes — and therefore available to the lower and middle class —makes it easier to raise children and have a family life; we can expect to have more of that.
The family stands at the center of the American Dream. The American Dream, for the vast majority of Americans, starts with the ability to raise a family.
The Rubio-Lee plan is the right solution to pressing problems that too many Americans face and the pressing political problems the Republican Party faces.
I do not know who will be the next president of the United States. But I do know that the next Republican to be elected president of the United States will be elected on a platform very similar to this one, and that when it becomes law, it will measurably and enduringly improve the welfare of millions of Americans. And that is something to be celebrated.
