Squeaky Wheel: Is Marco Rubio Really Threatening to Kill Tax Reform?

Posted: Dec 14, 2017 5:05 PM

As the moment of truth draws nearer, a few thoughts on Marco Rubio's announcement that he's a "no" on tax reform unless the final bill includes a further expansion of the refundable tax credit he's been advocating.  I come at this from the perspective of a supporter of the imperfect (but unfairly maligned) GOP tax plan, and an admirer of both Senators Rubio and Lee:

(1) Rubio recognizes that this is his moment of maximum leverage.  With Doug Jones' Alabama win, Senate Republicans need to vote on tax reform before Christmas, while they still have a two-vote cushion to work with.  After Jones' victory is certified and he's sworn in, the margin for error is cut in half -- and with Bob Corker, Jeff Flake, and Susan Collins already in the "maybe" camp, any additional potential defections could be fatal.  Rubio sees his moment and is seizing it.  You can't really blame him for that -- it worked for Ron Johnson in the last round -- but how many more lawmakers might notice the squeaky wheel incentives and follow his lead in asking for more hobby horse changes?  More me-tooism could derail an already-fragile process.

(2) On a policy level, I'm somewhat sympathetic to what Rubio and his colleague Mike Lee are trying to accomplish, although it's also worth noting that they've already moved the bill significantly in their direction (the bill doubles the current child tax credit) on this issue.  Their amendment to go even further failed in the Senate, but they had their fair shot at it, which is partially why they both ultimately decided to vote for the final bill.  The reason they're back at the bargaining table now is that fellow Republicans had told them that the 20 percent corporate tax rate was effectively sacrosanct.  It wasn't going to budge, for fear of stifling growth, so increasing it by roughly one percentage point (i.e., decreasing the corporate cut by that much) in order to pay for additional tax benefits to middle income parents was a nonstarter.  But then the House/Senate conference committee announced that they were going to tick up the proposed new corporate rate by one percentage point after all -- to 'pay for' a slight cut in the very top income tax rate, from 39.5 percent to 37 percent.  There are economic reasons for slashing that top rate a bit, but the populist optics of it (something that matters to the president, in particular) aren't great:

That's why Rubio and Lee are crying foul.  If the corporate rate turned out to be flexible in order to cover revenue-related shortfalls in other areas, why not direct those benefits to non-millionaires?  That's a fair point both on policy and politics, and it strikes me as unfair to try to paint Rubio and Lee as redistributionist lefties on this issue, even though there are good economic arguments in the other direction, too.  This is an anti-Rubio complaint that many conservatives will agree with:

(3) What kind of concession would it take to bring Rubio (and presumably Lee) back on-side?  And might those changes also help satisfy someone like Collins, who's also raised concerns about altering the corporate rate to allow for income rate cuts for the very highest earners?  After all, one of the more populist arguments for the House-passed bill was that, at Trump's request, it didn't bring down federal income tax rates for "millionaires and billionaires," not that Democrats and their media allies are acknowledging that point.  If Rubio can strike even a modest compromise and claim victory, that would be a feather in his cap.  My guess is that's what'll happen -- they'll find a way to expand the refundable tax credit a bit to help more working families, and the Floridian can call it a win and vote yes.  But if he fails to gain any substantive new policy shift in his direction, Rubio will either have to be the guy who kills a massive tax reform bill, or he'll fuel his reputation among many voters as a politician who makes a lot of noise, then caves.  Neither is an attractive option.  The former would be a disaster for the party and would gravely harm a long-term conservative goal; the latter would be an embarrassment for him, and fuel a common line of ridicule from his critics.  Here's "ReformiCon" Ross Douthat backing Rubio up on policy, but wondering aloud about follow-through:

(4) For what it's worth, this first quote comes from the Senate GOP's second in command earlier this afternoon. Maybe Rubio has already notched a small victory, assuming conferees are on board -- or...maybe not.  The second tweet is a quote from the Senate Finance Committee Chairman:

(5) Finally, regarding Hatch's "probably" conjecture, I heard from a senior Senate GOP source yesterday that they were feeling confident about getting to 50 votes, although that was not quite a done deal.  But that was before Rubio drew this line in the sand. The path is narrow and the clock is ticking.

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