Republicans for wealth redistribution? by Chris Matthews @FortuneMagazine September 23, 2014, 5:24 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons Mitt Romney spent a significant portion of his 2012 presidential campaign slamming President Obama for believing “that if you simply take from some and give to others, then we’ll all be better off.” This belief in what Romney called “redistribution,” has, he argued, “never been a characteristic of America.” Romney’s statement wasn’t true at the time. Wealth redistribution has long been a part of American policy: Social Security and Medicare taxes and benefits redistribute wealth from the young to the old, while the earned income tax credit redistributes wealth from the affluent to the poor, and those are just two examples. But arguing that we shouldn’t redistribute can be great politics, especially in Republican circles. As recently as 2011, a larger portion of Americans believed that the government shouldn’t redistribute wealth by heavily taxing the rich than those who felt the opposite: Since that time, however, Americans seem to have become concerned enough about growing income and wealth inequality that a majority is now in favor of some form of redistribution. This might explain why two up-and-coming voices in the Republican Party, Mike Lee and Marco Rubio, have taken to the editorial pages of the Wall Street Journal to call for, well, more redistribution. The U.S. senators are calling for “pro-family, pro-growth” tax reform, which aims to lower the corporate tax rate by closing loopholes and transform the personal income tax into two marginal tax brackets of 15% and 35%, from the current seven-bracket system that ranges from 10% to 39.6%. To top it off, they plan to do this without sacrificing any revenue that the government brings in from taxes. The main argument for this tax plan is that it will help eliminate what the senators call the “parent tax penalty,” which they refer to as a “pernicious distortion” that is widely misunderstood “even by its victims.” They explain: Today, parents are, in effect, double charged for the federal senior entitlement programs. They of course pay payroll taxes, like everyone else. But unlike adults without children, they also shoulder the financial burden of raising the next generation of taxpayers, who will grow up to fund the Social Security and Medicare benefits of all future seniors. This hidden, double burden on parents isn’t offset anywhere else in the system, and so true conservative tax reform needs to account for it. Children aren’t consumer goods—they are investments parents make in their futures, and in the future of America, and therefore deserve to be treated as such in our tax code. Our proposal would account for this and level the playing field for working parents by augmenting the current child tax credit of $1,000 with an additional $2,500 credit, applicable against income taxes and payroll taxes—i.e., the taxes that most burden lower- and middle-income families. The credit would not phase out, and would be refundable against income tax and employer and employee payroll tax liability. While there is some logical merit to Lee and Rubio’s desire to redistribute wealth from the childless to parents—today’s children will be shouldered with the burden of paying our Social Security and Medicare expenses tomorrow—the plan merely responds to the distortions of one form of redistribution with even more redistribution. Lee and Rubio’s plan comes on the heels of a proposal from another big name Republican, Paul Ryan, who is calling for a little redistribution himself, with an expansion of the Earned Income Tax Credit, which he proposed in July. Both of these proposals mark a shift from the Romney 2012 message, which argued that the U.S. could jumpstart its economy by cutting taxes and reducing regulations. But with a party base that is loathe to add more to the national debt, and a general population that doesn’t want to shoulder the budget cuts necessary to make those tax cuts work, the Republican Party is in a bit of a bind. It can’t seem to muster national support for the policies it believes will jumpstart growth, and there’s less and less evidence that high taxes and burdensome regulation are holding the economy back. From the Bush tax cuts to the current experiment with massive cuts in Kansas, real-world examples are battering the Republican orthodoxy on how the economy reacts to tax and regulation cuts. In fact, economists like Robert Gordon are increasingly worried that we could be doomed to slower growth whether we favor Republican or Democratic prescriptions for taxes and regulation. He thinks that factors like slowing technology growth and changes in the country’s demographic makeup all but guarantee that we are entering a period of unavoidably slow growth. Of course, voters are still going to demand that elected officials somehow bring about an increase in the country’s standard of living. No wonder that even Republicans are starting to take a second look at wealth redistribution, even if they don’t dare speak its name. Editor’s note: A previous version of this story erroneously stated that Medicare and Social Security redistribute wealth from the old to the young. In fact, these programs redistribute wealth from the young to the old.