John Harwood and Marco Rubio got into a tiff during last week's debate about Rubio's tax plan in which Harwood claimed it would disproportionately benefit the top one percent of income earners and Rubio countered that it would help the poor more.
First off, Harwood was right. The rich will save far more actual money than the poor, which Rubio ultimately conceded when he said, "Yeah, someone who makes more money, numerically, it's gonna be higher." Right. His argument was that, from a percentage standpoint, the poor would benefit more under his plan.
But it turns out that claim is based on either an oversight or an outright lie, depending on which way you look at it. The way he's helping the poor is by replacing the standard deduction and personal exemption with a $2,000 credit, or $4,000 for couples. That's nearly double the highest deduction that a couple in the bottom tax bracket can currently claim. But here's the catch—it's not actually just a deduction on what people owe, it's a refundable credit—more like cash in the pocket—that his campaign has already distanced itself from. Dylan Matthews explains:
Rubio's proposal, as originally laid out, is not a plain old credit. It's a fully refundable credit. Think about that for a second. Rubio's original proposal would give any household in America $2,000 or $4,000, no questions asked. It was a basic income. It was a massive increase in the welfare state of a kind that no Democratic candidate, including Bernie Sanders, is proposing.
So it's perhaps no surprise that when I asked his team about this, they insisted that this was a mistake, and the credit was in fact much more limited. "Rules would be tailored to ensure that our reforms would not create payments for new, non-working filers," a Rubio aide told me in April.
It's unclear what exactly that means, especially since the aide insisted that the tax was nonetheless refundable. But one thing it definitely does mean is that millions of people who would've benefited from a simple $2,000 to $4,000 refundable credit won't benefit under Rubio's actual plan.
"A fully refundable personal credit would be a radical change," the Tax Policy Center's Len Burman explained in a blog post. "It would cause millions of Americans with no earnings and no other reason to file to become tax filers purely for purposes of claiming the credit." Rubio's more restricted plan, which would bar "new, non-working filers," wouldn't help those millions.
That refundable credit is what Rubio was citing for his claim that the poor would do better than rich under his plan, but his team apparently says it won't work the way it was originally laid out. They also haven't provided any specifics for how it would work. So either Rubio is planning on simply giving $2,000-$4,000 to the poor or he's lying about how much his plan would actually benefit them.