NCPA - National Center for Policy Analysis

Lee-Rubio Tax Plan

September 24, 2015

Since the roll-out of the Lee-Rubio tax proposal in March 2015, the Center on Budget and Policy Priorities and the Tax Foundation have disagreed whether the plan would benefit people at lower income levels. The short answer is: It depends.

The Lee-Rubio plan is short on details regarding several provisions that could make a significant difference, particularly for those between poverty and the middle class. Overall, though, low-income taxpayers will be better off under Lee-Rubio if Congress continues existing tax credits that are not discussed in the proposal, such as the earned income tax credit (EITC) and the additional child tax credit.

  • The Lee-Rubio plan eliminates the standard deduction. The proposal does not say whether dependent exemptions would be eliminated also. Under current law, they are worth $4,000 per year per dependent.
  • In lieu of the exemption, the plan allows for a $2,000 personal credit for single filers, $4,000 for married couples.
  • The Lee-Rubio plan also creates a new $2,500 child tax credit, which would be in addition to the current child tax credit and the earned income tax credit.

For taxpayers with children approaching middle class incomes, the new child tax credit could help lower their effective tax rates. While the EITC and other means-tested benefits phase out as income rises, this credit would offset that loss. Since filers with lower-incomes could probably claim more of the new child tax credit as their incomes rose, this could moderate the current tax disincentive for additional work and saving.

In general, the Lee-Rubio plan appears to give lower- and middle-class taxpayers a break while simplifying the tax-filing system.

Source: Tyler Prochazka and Pamela Villarreal, "Would the Lee-Rubio Tax Plan Help Lower-Income Households?" National Center for Policy Analysis, September 23, 2015


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