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Mike Lee’s Tax Reform Rewards Families and Reaps Praise

Mike Lee talked taxes at AEI yesterday, and the rave reviews are in. Dubbed by this magazine “The Senate’s Mr. Tea,” Mike Lee hasn’t lost any of his firebrand zeal, as his spearheading of the “Defund Obamacare” campaign evidences. However, he is pairing his Tea Partyism with a communitarian messaging of late, culminating in a family-friendly […]

Mike Lee talked taxes at AEI yesterday, and the rave reviews are in.

Dubbed by this magazine “The Senate’s Mr. Tea,” Mike Lee hasn’t lost any of his firebrand zeal, as his spearheading of the “Defund Obamacare” campaign evidences. However, he is pairing his Tea Partyism with a communitarian messaging of late, culminating in a family-friendly tax reform plan that goes as far as any politician’s proposal, and certainly any Republican one, of late to put the needs and well-being of working families ahead of the wealthy and well-connected.

As Jim Pethokoukis describes it, “Senator Mike Lee of Utah is offering fellow Republicans a possible path out of the political and policy wilderness.”

At its core: a new $2500 per child tax credit — in addition to the existing $1000 credit — available to all parents of dependent children and applicable to both payroll and income taxes. The expanded tax break would help reduce the “parent tax penalty.” Parents contribute twice to senior social insurance programs; first when they pay payroll taxes, then again when they incur the cost of raising the next generation of taxpayers, their kiddies. …

In a way, Lee is proposing a “human capital” gains tax cut. … In addition, Lee would reduce the current seven individual income tax brackets to two with 15% and 35%.

Yuval Levin also finds Lee’s proposal more than sound (it is based in large part on an article published in the second issue of Levin’s own magazine, National Affairs):

The combination of reforms Lee proposes is, to begin with, good policy. It would make our tax code friendlier to growth and more supportive of prosperity, and would correct a number of iniquities in the current code, in the process easing for many the path into the middle class and upwards through it and beyond it. It’s also good politics, as offering a larger child credit would help build a broader constituency for the other tax reforms (which conservatives have long wanted) while at the same time enabling the right to show working-class families how conservatives policies can improve their lives.

Most of all, though, Levin celebrates the positive signal that this speech represents, for “to see a prominent conservative politician take up the cause and offer the sort of vision of it that Lee did in his remarks today, is a cause for great encouragement and hope. … Encouraging signs are few and far between these days, but this was a big one.”

Tim Carney over at the Washington Examiner gives Mike Lee’s plan the official libertarian populist blessing, and commends it for its framing and policy:

First, Lee’s plan isn’t a flat tax. He calls for a 15 percent rate and 35 percent rate. He puts much more emphasis on making the tax code clean and simple – eliminating deductions, streamlining returns – than on flatness. This tacitly accepts the notion of a progressive income tax code. He’s agreeing that the rich ought to pay a higher portion.

Along the same lines, Lee’s tax plan would cap the mortgage interest deduction at $300,000. Most homeowners would see no difference, but lobbyists living in Northwest Washington and Chevy Chase would see their deductions shrink.

Most importantly, Lee rejects the notion, persistent among some conservatives, that there’s something bad about knocking low-income families off the tax rolls. The centerpiece of Lee’s bill is an expanded child tax credit that would not only reduce income taxes to zero, but also offset payroll taxes.

In doing so, he explicitly rejects Romney 47-percentism: “Working families are not free riders.” …

Remember, this sort of talk isn’t coming from the squishy center, but from the Red Meat Right – from Utah, to be precise. And it could represent a much-needed libertarian-populist wave in the GOP because it comes from the same well from which the Tea Party sprung.

The pro-family sociologist W. Bradford Wilcox weighed in immediately following the speech in a follow-up panel, then continued his remarks over at The Atlantic

Senator Lee’s proposal is only one step in the right direction. But what’s particularly encouraging about his proposal is that it would lift the sagging economic fortunes of many working-class families by targeting their payroll taxes. Let’s hope more Republicans (and Democrats) take a page from Lee’s playbook and seek policies that renew the flagging economic fortunes of family life in all too many of our nation’s poor and working class communities.

Last, but furthest from least, Pete Spiliakos is over the moon:

I can’t say enough good things about this speech on family-friendly tax reform by Utah Senator Mike Lee. It is a beautifully written argument for a Republican tax agenda that prioritizes the interests of middle-class and struggling working parents. Lee’s speech also contains some powerful but very civil criticisms of the ideas underlying Romney’s 47% comment and Rand Paul’s flat tax proposal. Lee’s identity as an insurgent, constitutionalist, Tea Partier allows him to position middle-class-oriented populism as authentically conservative. This is a huge step toward making the GOP a more middle-class-friendly party.

There are a few features of the speech that stand out for special notice. One is Lee’s willingness to put payroll taxes on par with income taxes. Because income taxes are disproportionately paid by the well-off, and payroll taxes disproportionately by the working-class, payroll taxes have been ignored by the Republican Party. Getting a sitting Senator to recognize their importance is itself a great achievement. Another is Lee’s push back against the flat tax and consumption tax crowd, prioritizing families (despite his verbal acrobatics) and representing a real departure from traditional strains of economic and libertarian thinking about tax policy.

Finally, this is a tax plan that makes philosophical concessions to the world as it is, not as it might be in an economics text book. As Tim says, it tacitly accepts a progressive tax code, and accepts that the rich should pay more. Also, its core justification recognizes the future survival of the welfare state and adjusts families’ taxes to better reward them for contributing to its solvency and society’s well being. This is no mean thing.



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