Conservatives hate taxes, they dislike deficits, and they’re scared of spending cuts. Dynamic scoring is the answer.
The basic idea here is that massive tax cuts boost growth so much that they pay for themselves, and so there’s no actual trade-off between lower taxes and balanced budgets. In this telling, eating your cake leads your body to burn calories so fast that it’s like you end up thinner than you started!
.. As Jonathan Chait wrote, the skeptical reception Rubio’s plan got among many on the right spoke to a problem almost without precedent in the modern GOP: Rubio had designed a tax cut “so gargantuan that nobody in the party actually believes it.”
.. While Rubio gives some lip service to deficit reduction — he later tells Harwood that balancing the budget will require entitlement reform, not just tax reform — he clearly cares a lot more about the tax cuts than about the deficit reduction, just as Bush did.
Krugman: Cranks on Top
You probably know that Mr. Rubio is proposing big tax cuts, and may know that among other things he proposes completely eliminating taxes oninvestment income — which would mean, for example, that Mitt Romney would end up owing precisely zero in federal taxes.
.. What you may not know is that Mr. Rubio’s tax cuts would be almost twice as big as George W. Bush’s as a percentage of gross domestic product
.. So when Mr. Rubio genuflects at the altars of supply-side economics and hard money, he isn’t telling ordinary Republicans what they want to hear — by and large the party’s base couldn’t care less. He is, instead, pandering to the party’s elite, consisting mainly of big donors and the network of apparatchiks at think tanks, media organizations, and so on.
In the G.O.P., crank doctrines in economics and elsewhere aren’t bubbling up from below, they’re being imposed from the top down.
Rubio’s Call for No Capital Gains Tax Is a Break With the G.O.P.
When Steve Forbes ran for president in 1996 on a plan that called for no taxes on dividends and capital gains, Mitt Romney, then a private citizen, took out a full-page ad in The Boston Globe attacking his proposal as plutocratic.
.. Mr. Rubio seeks a lower top rate than is imposed today, but one higher than any other current Republican presidential candidate has proposed. Mr. Cruz’s plan, which combines a flat income tax with a value-added tax, would impose an effective combined tax rate of 24.4 percent on wages.
.. First, a large fraction of capital income is taxed twice, at the corporate and individual levels. Dividends are distributions of already-taxed corporate profits, while a rise in a stock price represents a rise in expected future taxable corporate profits. Second, economists generally believe the revenue-maximizing tax rate on capital gains is much lower than the revenue-maximizing tax rate on salaries. This is in large part because capital gains are voluntary; you pay only if you sell an appreciated asset, so investors are likely to respond to higher tax rates by not selling.
Third, and more controversially, some economists say capital is significantly more sensitive to tax policy than labor. That is, high taxes on capital income will do more to discourage investment than high taxes on wages do to discourage work. Capital taxes are therefore more damaging to the economy than wage taxes.
.. When you start to see Republican economic advisers admitting that tax cuts on dividends and capital gains aren’t working, you know the game is up.
Marco Rubio’s Puppies-and-Rainbows Tax Plan
Since Oprah is a real person with no actual involvement in this proposal, it’s better to describe the Rubio-Lee proposal as the Puppies and Rainbows Tax Plan. After all, it’s full of things everybody likes, at least on the Republican side: family tax cuts that will make it easier to buy the children a puppy, and capital tax cuts that chase a pot of capital investment gold at the end of the rainbow.
.. Even if those preventive measures work, they will still highlight a central feature of the Rubio-Lee plan: It aims to treat business income more favorably than labor income, while most families derive most of their income from labor, not business.