How Republicans reconcile these two things will be a key dynamic to watch. And one candidate to pay close attention to in this regard is Marco Rubio, who early on in the cycle gave speeches about inequality and challenges facing the middle class, yet has also proposed a tax plan that would eliminate taxes on capital gains, dividends, and estates.
Rubio has argued that he’d be just the person to take on Hillary Clinton over who will help struggling wage earners because he was once one himself. “If I’m our nominee,” Rubio said at the GOP debate, “how is Hillary Clinton going to lecture me about living paycheck to paycheck?”
Now Rubio has demonstrated how he’ll use his biography to defend his tax plan. In an interview with John Harwood, he was asked how people who live paycheck to paycheck will receive his tax plan:
HARWOOD: You said at the debate the other day that you can compete toe to toe with Hillary Clinton on people who live paycheck to paycheck because you lived paycheck to paycheck.RUBIO: And I was raised paycheck to paycheck.HARWOOD: How do you think people who live paycheck to paycheck will receive that your tax plan eliminates taxes on estates, capital gains, and dividends?RUBIO: First of all, capital gains and dividends is investment. My father had a job as a bartender at a hotel. And the reason why he had a job as a bartender is because someone with money invested in that hotel. That’s why he had a salary, and that’s why he had tips.HARWOOD: One of the critiques of your plan…has been, come on, that’s a step too far. You can’t eliminate capital gains and dividends. It’s a political loser.RUBIO: Anything you tax, you’re gonna get less of. That’s why we tax cigarettes, because we don’t want people to smoke. We want more investment. Why would we tax it?
It is true that Rubio’s tax plan does offer middle class tax relief through child credits. Rubio will highlight this fact, along with his biography, to make the case that he’s the candidate who is truly focused on helping Americans struggling with stagnating wages. It is also true that Rubio’s tax plan cuts the top tax rate “only” down to 35 percent, which is less of a tax cut than some supply side Republicans would like.
But tax experts who examined Rubio’s plan told Jonathan Chait that once you factor in its elimination of taxes on capital gains, dividends, and estates, what’s left is a tax cut that is hugely regressive, with a good bulk of its benefits going to the wealthy.
Clinton, by contrast, is likely to propose some combination of tax hikes on investments and inherited wealth. Beyond that, Clinton will propose building on Obamacare’s coverage expansion, while Rubio’s health care plan would repeal the ACA and replace it with a plan that would probably mean workers, the poor, and seniors pay more.
In 2012, Democrats succeeded in savaging Mitt Romney’s tax plan over its regressive features. Republicans explaining Romney’s loss have tended to argue that he was an easy target for such attacks because of his personal wealth and his own low effective tax rate, which was due to the fact that his income was largely derived from capital gains and dividends. Rubio’s candidacy seems premised on the idea that his biography will allow him to elude such attacks. Rubio can sell struggling wage earners on the idea that a regressive tax plan eliminating taxes on capital gains and dividends is in their interests, because his father was a struggling wage earner who would not have had a job at all if it weren’t for investment.