In his autobiography, Sen. Marco Rubio, R-Fla., describes two different types of legislation. A proposal can be a "B-HAG, a big, hairy audacious goal," or it can be a "Tallahassee Special" -- a proposal that politicians announce with great fanfare but that makes little real difference in people's lives.
In the early and mid-2000s, Florida's property values skyrocketed, and property taxes soared from $15.3 billion in 2000 to $31 billion in 2007. So at the beginning of the 2007 legislative session, newly elected Republican Gov. Charlie Crist, and members of the Republican-controlled Legislature knew they had to cut property taxes. As the new speaker of the Florida House, Rubio pushed for a B-HAG -- a tax swap that would entirely eliminate property taxes on primary residences and replace the lost revenue with a sales tax increase. Crist and Senate Republicans wanted what Rubio considered a Tallahassee Special -- a modest increase in the exemption for primary residences and no change in the sales tax.
For over a year Rubio tried everything to deliver major property tax relief to Floridians. His original tax swap plan was approved by the House early in 2007 but ignored by the Senate. He then tried compromising with the governor and the Senate. But this compromise, which required voter approval of a constitutional amendment, was removed from the ballot by the courts. He then succeeded in bypassing the Legislature and getting a special tax reform panel to put a constitutional amendment limiting property taxes on the ballot. But this too was struck down by the courts. Finally, he tried gathering 600,000 signatures so he could put his plan on the ballot, but this too failed.
Reluctantly, fearing he would be blamed for the lack of any property tax relief, Rubio agreed to a Crist proposal that Rubio considered a “timid tweak” of the status quo that cut property tax “only negligibly.” This was a major victory for Crist and a defeat for Rubio. But it would be Rubio who would defeat Crist in Florida's election for the U.S. Senate in 2010.
Despite Rubio's failed efforts, Floridians did in fact begin getting big property tax cuts just as Rubio was finishing his term as speaker. They did not come from the Florida legislature or the governor or even from a voter-approved constitutional amendment. They came courtesy of the great financial crisis of 2007 and 2008. Wall Street went into convulsions. Mortgage credit dried up. Foreclosure rates multiplied. House prices plummeted. And just as housing values had jacked up property taxes a few short years before, the collapse of the Florida real estate market caused property tax revenues to drop like a stone -- from $31 billion in 2007 to $24 billion in 2012.
With neither a property tax nor a sales tax at the federal level, Rubio could not readily transplant the tax reform proposals that were so prominent in his career in Tallahassee to Washington. But as a U.S. senator and presidential candidate, Rubio was not about to give up pursuing big, audacious goals.
In a 26-page white paper released on March 4, Rubio and Republican Sen. Mike Lee of Utah described their Economic Growth and Family Fairness Tax Plan, a complete overhaul of business and individual taxation in the United States. The business component of their plan is similar to most flat tax proposals: immediate write-off of capital purchases offset by disallowance of deductions for interest.
What really stands out is the individual part, which, in addition to the usual reduction in the number of tax brackets and elimination of most tax expenditures, includes an enormous and expensive expansion of the child tax credit. On top of the $1,000 credit available under current law, under the Rubio-Lee plan, an additional $2,500 credit per child would be available. The credit would reduce income and payroll tax liabilities, including employer-side payroll tax liability.
The Rubio-Lee plan can be packaged with a lot of talk about family values, but make no mistake, the tax credits are straight out of the old Democratic tax policy playbook. Rather than relying on the benefits of tax cuts to trickle down from businesses to individuals, Rubio likes providing tax relief directly to individuals. The Rubio-Lee plan shares much of the same political chemistry as Rubio's tax swap in Florida. It is big and bold. And it seeks to make a direct and noticeable difference in the lives of middle-income citizens. Rubio's father was a bartender. His mother was a hotel maid. Unlike a Mitt Romney or a Jeb Bush, Rubio conveys convincing concern for the working class.
Moreover, the Rubio-Lee plan challenges the Republican establishment to move outside its comfort zone. It flies in the face of traditional supply-side economics. "With this proposal, Senator Rubio makes himself the party's most visible ally of the 'new' Republican idea that the Reagan tax-cutting agenda is a political dead end, and that the party now must redistribute revenue directly to middle-class families," complained the Wall Street Journal editorial writers on April 13.
Time and again, Rubio has proved that he can handle criticism like this from fellow conservatives. Their attacks raise his public profile. He can afford to lose a few battles because his goal is to win the war. Just ask Charlie Crist.
This post is an abbreviated version of a May 18, article appearing in Tax Notes and State Tax Notes.