In the most recent Republican debate leading up to the 2016 presidential primary, Sen. Marco Rubio (R-FL) said that he is proposing an additional Child Tax Credit, or CTC, to help families, “especially … working families,” invest in their children. He lamented that “struggling” parents must face the rising costs of child care and went on to say that he is going to have a “pro-family” tax plan because it will help families, which Rubio says are “the most important institution in society.”
No matter how much Sen. Rubio may sell himself as a champion for families, however, the impacts of his policies seemingly tell a different story. In particular, Rubio has offered no clarity on how his tax plan would affect recent expansions of two key tax credits that provide critical assistance to low-income families—the CTC and the Earned Income Tax Credit, or EITC.
Sen. Rubio’s ambiguous position on tax credits for working families
The CTC is a federal tax credit that was created to help working families address the costs of raising children. In 2013, it helped around 3.1 million people get out of poverty and reduced poverty for an additional 13.7 million people. The EITC, another federal tax credit, boosts the wages of low- and moderate-income working people; like the CTC, it significantly helps people in poverty, lifting around 6.2 million people out of poverty and reducing poverty for another 21.6 million in 2013. Last year, key provisions of these two programs were going to expire at the end of 2017, which would have made 16 million people “fall into or deeper into poverty.”
Sen. Rubio’s tax plan, released in October 2015, included no plans to make these key provisions permanent. Instead, Rubio promised to eliminate all tax extenders, which would have included the key provisions of the CTC and the EITC that were set to expire. Fortunately, the congressional tax extender bill that was passed in December 2015 takes a different path by making permanent the key provisions of these two critical programs for working families. Rubio failed to show up to vote on the tax extender package, which also included spending bills for the current fiscal year; he was the only presidential candidate in the Senate to miss the vote. When asked about his absence, Rubio said, “in essence, not voting for it, is a vote against it,” showing he did not support the package that made the CTC and the EITC provisions permanent.
Sen. Rubio has not addressed specifically how making the CTC and the EITC expansions permanent affects his tax plan. However, considering that his plan was developed before the tax extenders package became law and that he opposed the tax extender deal, there is strong evidence to suggest that he would have let the expansions lapse. Rubio’s tax plan therefore provides a glimpse at the reality behind the rhetoric: Until Rubio clarifies his position, it is possible that he intends to push a tax plan that would harm working families while providing even more benefits to the wealthy few.
Instead of supporting working families, Sen. Rubio’s CTC plan could:
- Erode the CTC for lower-income families. As stated above, Sen. Rubio’s plan did not include provisions to make key parts of the EITC and the CTC permanent; instead, his plan said it would eliminate all so-called tax extenders. If as president he did eliminate these extenders, single parents with two children working full time, year round for the federal minimum wage with no tax liability would see their CTC cut by more than $1,700 per year—more than 10 percent of their salaries—after 2018.
- Give his own family a tax break of nearly $8,900. Regardless of whether Sen. Rubio’s tax plan repeals the recent expansion of the CTC, his new CTC gives much larger benefits to higher-income families with children than to low-income families.
Sen. Rubio’s plan could hurt working families while benefiting higher-income families
Sen. Rubio’s plan could slash the CTC for working families with children at a time when these families need support more than ever. From 2000 to 2012, the main costs associated with supporting a family—health care, child care, college savings, housing, and retirement savings—increased $10,600, on average, even as incomes remained stagnant. Families with children have particularly felt this economic squeeze. Over the same period, child-related costs—which accounted for 70 percent of the increase in key costs for middle-class families with children—increased faster than most other expenses.
These skyrocketing child-related costs make families with young children particularly susceptible to poverty. In fact, nearly 23 percent of infants and toddlers lived in households with incomes below the federal poverty line in 2013. In Sen. Rubio’s home state of Florida, child care for an infant in a child care center costs $8,694 per year, on average. This means that child care could eat up more than half of the wages of a single parent of an infant who works full time, year round for Florida’s $8.05-per-hour minimum wage.
Despite the growing squeeze that families face, in March 2015, Sen. Rubio and Sen. Mike Lee (R-UT) proposed a regressive CTC in the Senate that, if it had passed, would have eroded the credit for lower-income families while cutting taxes for higher-income families. In October 2015, Rubio’s presidential campaign released a slightly modified plan that does not state support for key provisions of the CTC, which means it could hurt families who are already struggling to get by. Rubio claims that his plan would provide an additional CTC of up to $2,500 per child, “especially for working families,” but in reality, Rubio proposed his plan before the CTC provisions were made permanent, and he did not include policy to prevent the erosion of the credit for lower-income families.
As released in October, Sen. Rubio’s tax plan apparently would have let key parts of the current CTC expire in 2017, causing lower-income families to have their CTC significantly reduced beginning in 2018. Even though the congressional tax deal made these key CTC provisions permanent, Rubio’s tax plan did not include a provision to do so. And when the Tax Policy Center asked the Rubio campaign about his plans for the key provisions, it did not answer the specific questions. If under his plan Rubio were to repeal the key provisions of the CTC, then single parents with two children working full time, year round for the federal minimum wage of $7.25 per hour who have no tax liability—as is the case for many families after receiving the EITC—would have their CTC cut by more than $1,700 each year—more than 10 percent of their salary—starting in 2018.
In addition, Sen. Rubio’s proposal would give a substantial new credit to high earners, thereby lowering their taxes. The CTC currently phases out benefits for higher-income families so that a greater share of its benefits go to the families who need them most. Rubio’s new credit more than doubles the earnings ceiling for this phaseout such that most higher-income parents—even those who earn well above a quarter of a million dollars each year—would receive the maximum new credit for each child. Therefore, if Rubio were to not support keeping the key provisions of the existing CTC permanent, the net effect of his CTC likely would be a larger economic burden for lower-income families with children and tax breaks for wealthier families with children. For more information on the erosion of the single-parent CTC, see the Methodology section below.
Sen. Rubio’s backward CTC plan is just one aspect of his platform that would result in a windfall for higher-income families while increasing hardship for those who are struggling. In addition to his regressive CTC, Rubio’s campaign plan, like his March 2015 Senate plan, included no provisions to renew key elements of the EITC, which kept more than 6.5 million Americans out of poverty in 2012 and enjoys widespread bipartisan support as a way to encourage work and boost family income. Fortunately, the December 2015 tax extender bill also made key provisions of the EITC permanent, helping working families. But for the same reasons as the key CTC provisions, Rubio’s position on keeping the key EITC provisions permanent is unclear.
And the remainder of Sen. Rubio’s tax plan is no better. Tax Policy Center analysis shows that “high-income households [benefit] the most” from Rubio’s tax plan. Even though the Tax Policy Center assumed that Rubio would not repeal the recent expansions of the CTC and the EITC, it still concluded that Rubio’s plan would provide the lowest-income taxpayers an average tax cut of only $252, while the top 0.1 percent of tax filers would receive an average tax cut of more than $900,000, nearly 14 percent of their after-tax income. Rubio’s entire tax plan—a gift to the wealthy—would cost $6.8 trillion over the next decade. This cost means that Rubio would need to cut spending significantly to prevent the deficit from swelling, which would likely lead to cuts in critical programs for working families.
Sen. Rubio also fails to mention that his CTC plan would increase his own CTC significantly, thereby cutting his own taxes. Rubio often has referenced his experiences growing up in a lower-income household to demonstrate that he empathizes with working families. Yet a plan such as his might have caused his parents to not receive a CTC at all during his childhood if it repealed the recent CTC expansion. Today, in contrast, the plan would give Rubio and his wife—based on an estimated family income of nearly $310,400 in 2014, as reported in Senate disclosure forms—a tax reduction of nearly $8,900 this year. For more information on Rubio’s family’s estimated CTC, see the Methodology section below.
The nation needs a progressive Child Tax Credit
In order to help truly expand the American Dream, the United States needs a progressive CTC—not a plan that hurts families, such as the one Sen. Rubio has put forward. The Center for American Progress recently released a CTC proposal that would make the credit significantly more progressive, doubling the share of the benefits that go to the bottom 20 percent of taxpayers with children younger than age 17. In contrast, when Rubio drafted his CTC plan, he included no provisions to prevent the erosion of the CTC for lower-income families. In addition to making permanent the key provisions of the existing EITC and the CTC that were set to expire at the end of 2017, CAP’s proposal would make the CTC more accessible to low- and moderate-income families by making the credit fully refundable and eliminating the earnings threshold. Finally, CAP would introduce a supplemental monthly Young Child Tax Credit of $1,500 per year for children younger than age 3.
In contrast to Sen. Rubio’s proposal, CAP’s progressive proposal would reduce overall childhood poverty in the United States by 13.2 percent, raising 2 million children out of poverty. (see Methodology section below) A more progressive CTC plan would do much more than Rubio’s plan to help American families and strengthen what Rubio himself calls “the most important institution in society.”
Sen. Rubio claims to believe that the United States is a place where “through hard work and perseverance [people] are able to be successful.” But with the rising costs of middle-class necessities, policies such as his CTC plan show that Rubio’s America is one in which only the wealthy few can live the American Dream. Rubio’s CTC proposal, along with the other provisions of his tax plan, shows that he is determined to cut taxes for the wealthy, but he refuses to clarify whether he would raise taxes on the struggling families who are most in need of a break.
To calculate the cut in the CTC for a single parent of two children who works for the federal minimum wage, the authors first calculated that worker’s wages for full-time, year-round work. Under current policy, the CTC begins to phase in at earnings of $3,000. Thanks to Congress’ end-of-year tax deal, this threshold will remain in place—but Sen. Rubio wrote his plan before the tax deal and did not include any caveats to prevent key provisions of the CTC from expiring in 2017. And Rubio’s position on these key CTC provisions is unclear. If the key provisions are repealed, the minimum earnings threshold would rise to approximately $14,600. As stated above, the Tax Policy Center analysis asked the Rubio campaign about the CTC provisions, but the campaign did not answer the specific questions. The Tax Policy Center chose to assume that the key CTC provisions would remain permanent. However, since Rubio’s campaign website says that his tax plan “dramatically simplifies the tax code” by eliminating all itemized deductions and tax extenders, we explore the possibility that Rubio will instead repeal the CTC expansion.
The Rubio family includes four children of CTC-eligible age. Using Senate disclosure forms from calendar year 2014, the authors estimated the Rubio family income by combining Sen. Rubio’s Senate salary; Florida State University salary; royalties from the Penguin Group; the liquidation of Sen. Rubio’s American Bar Association retirement fund; income from a rental property; and Sen. Rubio’s wife’s income. If an income source was listed as a range, the authors used the higher number listed. Rubio’s wife’s income was listed as “>$1,000,” so the authors assumed it was $1,000. Based on Rubio’s tax plan on his campaign website, the authors estimated that he plans to phase out 1 percent of a family’s new, additional $2,500-per-child CTC for every $1,000 that family earns over the $300,000 threshold—rounded to the highest $1,000, per current CTC law. If the Rubio family’s modified adjusted gross income—which is used to calculate a family’s CTC—was somewhat less than the authors’ estimation, the Rubio family would receive an even greater credit, up to a maximum of $14,000.
CAP evaluated poverty reduction among children younger than age 17, the maximum age of eligibility for the CTC, so the estimation that the CAP plan would raise 2 million children out of poverty likely underestimates the total poverty reduction among all children younger than age 18. CAP measured income changes relative to the federal poverty line, or FPL, treating income from the CTC as countable against the FPL for purposes of assessing poverty. The Center on Budget and Policy Priorities measured changes using the Census Bureau’s Supplemental Poverty Measure, or SPM, which measures a family’s resources after taxes and transfer payments. The authors’ unpublished analysis shows that the poverty reduction effects of CAP’s proposal using the SPM and the FPL are similar.
The authors’ calculations of the number of children who would be lifted out of poverty are based on Rachel West, Melissa Boteach, and Rebecca Vallas, “Harnessing the Child Tax Credit as a Tool to Invest in the Next Generation” (Washington: Center for American Progress, 2015), available at https://www.americanprogress.org/issues/poverty/report/2015/08/12/118731/harnessing-the-child-tax-credit-as-a-tool-to-invest-in-the-next-generation/; 2014 data from Bureau of the Census, “CPS Table Creator: March 2015 Current Population Survey,” available at http://www.census.gov/cps/data/cpstablecreator.html (last accessed November 2015); Chuck Marr, Bryann DaSilva, and Arloc Sherman, “Letting Key Provisions of Working-Family Tax Credits Expire Would Push 16 Million People Into or Deeper Into Poverty” (Washington: Center on Budget and Policy Priorities, 2015), available at http://www.cbpp.org/research/federal-tax/letting-key-provisions-of-working-family-tax-credits-expire-would-push-16.
Molly Cain is a Research Associate in the Center for American Progress Action War Room. Rachel West is an Associate Director for the Poverty to Prosperity Program at the Action Fund.