Author: tarek

Stymied in their efforts to fully repeal the Affordable Care Act (ACA), Republican leaders in Congress continue their efforts to undermine the law by starving it of funding.

Today, the Senate Finance Committee will consider legislation that would repeal some of the tax changes enacted to pay for the ACA. Republican lawmakers have indicated their interest in repealing the tax on medical devices since before it took effect in 2013, a position that is perhaps related to an ongoing lobbying spree by the medical device industry. Their efforts have generated some bipartisan support due to claims the tax hurts small business. But if their repeal efforts reflect a desire to protect medical device companies from the $2 to $3 billion a year the tax has been forecast to raise, then congressional tax writers should keep in mind that big, profitable medical device corporations have likely avoided more than 30 times that amount in federal income taxes by shifting their U.S. profits offshore.

Enacted as part of the 2009 Affordable Care Act, the medical device tax is a 2.3 percent excise on the sale of most medical devices sold in the United States. It applies both to U.S.-based companies and to their foreign competitors on sales within the United States. Congress enacted it, in part, to help fund expanded access to health care. The underlying rationale is that the medical device industry would reap substantial financial benefits from more consumers accessing health care through ACA and could, in turn, take on a small tax.

The 15 biggest U.S.-based medical device companies, as measured by 2014 revenues, will likely pay some of the tax. These companies have another thing in common: they have all chosen to shelter some of their profits from U.S. tax by declaring them to be “permanently reinvested” in foreign countries (see table). The companies, which include General Electric, Johnson& Johnson, 3M, Baxter and Abbott Laboratories, collectively disclosed $257 billion in permanently reinvested foreign profits at the end of their most recent fiscal years.

Corporations that declare their profits to be permanently reinvested abroad don’t have to report any deferred federal income tax on those profits to their shareholders. And these companies typically flout rules requiring them to estimate how much U.S. income tax they would owe if and when these profits become taxable in the United States. Just 57 companies in the Fortune 500 disclose the tax rate they would pay on these profits.

Two of these 15 device companies report their likely tax rate on repatriated profits, but the other 13 do not. If the 13 non-disclosing U.S. device makers paid income tax at the same 29 percent tax rate disclosed by the 57 companies included in our recent report, their resulting federal tax bill would be $69 billion. Added to the $4.5 billion tax bill collectively disclosed by the 2 device companies on this list, the 15 medical device companies profiled here may be avoiding almost $74 billion in federal income taxes on profits that they hold (at least on paper) offshore. It is possible that these companies have avoided even more tax than is calculated here.

President Barack Obama has proposed a half-measure that would subject the permanently reinvested earnings of U.S.-based multinational corporations to a one-time 14 percent tax. But there is little legislative momentum behind efforts to ensure that these companies’ offshore cash is taxed at the regular 35 percent corporate income tax rate, as it should be. The result is that the 15 companies profiled here will likely continue to avoid roughly $74 billion in federal income taxes on their offshore cash.

The medical device tax, by contrast, has been forecast to raise less than $30 billion over the next ten years. Many of the biggest medical device makers are foreign-based corporations, so these 15 companies will pay only a fraction of the $2-3 billion annual yield of the medical device tax. As long as these companies continue to avoid paying taxes on their offshore stash, it’s hard to see why Congress should prioritize repealing the medical device tax. 

With funding for the Highway Trust Fund (HTF) set to expire yet again on May 31st, many states are already delaying much needed infrastructure projects due to concerns over the fund’s ongoing solvency. Such delays and the fund’s impending expiration are putting fire to the feet of congressional lawmakers to find a solution to the perennial lack of dedicated revenue, due to our out-of-date gas tax, needed to pay for all of the infrastructure projects supported by the fund. In looking for a way to bridge the gap in funding, Congress should reject proposals to patch the HTF using some form of a tax on the repatriation of offshore profits and instead focus on a more permanent fix through the modernization of the gas tax.

Good: Raising the Gas Tax

Why does the HTF always seem to be in constant and dire need of additional funding? The answer is that lawmakers have repeatedly refused to update and reform the federal gas tax, the primary funding source of the HTF. The federal gas tax has not been increased since 1993, and the 18.4 cent-per-gallon tax has lost more than 28 percent of its value due to construction cost inflation and fuel efficiency in the time period since being fully dedicated to transportation in 1997.

With the HTF deadline again nearing, many Democrats and Republicans finally seem to be catching on to the need to increase the gas tax to make up for its longtime loss in value. Last week for example, a bipartisan group of House members proposed increasing the gas tax by indexing it to inflation, and scheduling further gas tax increases to occur in the future unless lawmakers agree on another funding mechanism.

Now would be an especially advantageous time to increase the gas tax given that gas prices have dropped to relatively low levels in recent months. These lower prices would make it easier for consumers to absorb the impact of a gas tax increase since they are already experiencing the benefit of the significantly lower prices.

The bipartisan push for increasing the gas tax and indexing it to inflation also makes a lot of sense given that it’s the only viable approach offered so far that would provide a long term solution to the HTF’s constant funding problems. In addition, the gas tax is a sensible way to fund transportation infrastructure because it generally requires those who use our infrastructure the most, by driving long distances or heavy vehicles, to bear most of the responsibility of its upkeep.

Bad: Repatriation

Besides modernizing the gas tax, the most often talked about way to fill in the gap in funding for the HTF has been either a voluntary or mandatory tax on profits held offshore by corporations. The problem with such proposals is that they would reward and encourage offshore tax avoidance, while at best only providing a temporary fix to the gap in funding.

The worst form of these proposals is a repatriation holiday, such as the one recently proposed by Senators Barbara Boxer and Rand Paul. Under their repatriation holiday proposal, multinational corporations could voluntarily bring back profits held offshore by paying a tax rate of 6.5 percent rather than the 35 percent rate they would normally owe.

On its face, this and other similar repatriation holiday proposals cannot be used to fund the HTF, or anything else, because they would actually lose revenue instead of raising it. In fact, the nonpartisan scorekeepers at the Joint Committee on Taxation (JCT) found that a proposal similar to the Boxer-Paul proposal would lose $96 billion over 10 years. The reason behind this is that the holiday would encourage companies to hoard even more of their profits in offshore tax havens moving forward in anticipation of another holiday, and much of the money repatriated under a holiday would have been eventually repatriated at a higher tax rate anyway.

In contrast to a repatriation holiday, many lawmakers have also proposed raising revenue to fund infrastructure through a mandatory or deemed repatriation tax on profits held offshore by corporations as part of a broader corporate tax reform. For example, President Obama has proposed to pay for infrastructure using a 14 percent mandatory tax on unrepatriated profits as part of a broad corporate tax reform that would include a 19 percent minimum tax on foreign profits moving forward. Similarly, Representative John Delaney has proposed a mandatory tax rate of 8.75 percent and would default to a tax system with a minimum tax of 12.25 percent on corporation’s foreign profits.

The trouble with either proposal is that they would reward companies for their current offshore tax dodging with a rate lower than the current rate of 35 percent, and over the long term would put in place international tax regimes that continue to incentivize companies to shift operations offshore. In addition, while both proposals would raise a substantial amount of revenue, they would only patch the HTF for a limited number of years, after which lawmakers would have to find another funding sourcing to pay for the gap in infrastructure funding. Finally, using revenue gained from taxing offshore profits to bridge the gap in the HTF would mean that this revenue would not be available for a variety of other important public investments where this revenue could be used.

Around the nation, environmentally minded Americans are taking steps to achieve e a greener nation. The tax code may not be the most obvious tool for achieving environmental change, but reforming some tax giveaways to oil and gas companies could help level the playing field between fossil fuel manufacturers and more sustainable energy sources. 

• Stop pretending oil companies are “manufacturers.” In 2004, Congress decided to enact a special tax deduction for 9 percent of the income of domestic manufacturers. A lobbying frenzy quickly transformed the bill so that the definition of manufacturing included film production, coffee, and, yes, the oil and gas industry. Paring back the manufacturing deduction to focus on actual manufacturing—and excluding oil and gas production from this lucrative tax break—would be a fine way to put fossil fuels on a level playing field with more sustainable energy sources.

• Repeal expensing of intangible drilling costs. In general, when companies make investments in capital assets, they are allowed to write off the cost of those investments gradually, over the life of the assets. But when oil companies spend money on materials and equipment for drilling, thanks to their lobbying clout, they get to write off these expenses immediately. This amounts to an interest-free loan from the federal government.

• Repeal “percentage depletion” tax breaks for oil and gas. It’s bad enough that oil and gas companies can write off their investments faster than they wear out—but thanks to a special tax break, when these same companies gradually write off the cost of their oil fields, they can routinely deduct more than the fields are actually worth. This is because the so-called “percentage depletion” rule lets oil companies write off a flat percentage of their gross revenues from production, even after already writing off the full cost of the oil fields.

A number of lawmakers have sensibly proposed paring back or repealing these tax breaks. Most recently, the “End Polluter Welfare Act,” jointly sponsored by Sen. Bernie Sanders (I-VT) and Rep.Keith Ellison (D-MN) would repeal two of the tax breaks mentioned above—expensing of intangible drilling costs and the “manufacturing” designation for oil and gas production—was introduced this week.

As we have noted before, these tax breaks are part of a network of unwarranted tax breaks that subsidize the production and use of fossil-fuel technologies, to the tune of billions of dollars a year. As millions of Americans observe Earth Day by making an effort to live in more sustainable, environmentally friendly ways, Congress’s to-do list to mark the occasion should start with pulling these tax breaks out by the roots. 

Legislators in the Pennsylvania House released an alternative to Gov. Tom Wolf’s tax reform plan last Tuesday. The House plan would increase income and sales tax rates to provide significant property tax cuts, as would the governor’s plan. One difference is that the House plan would raise the sales tax rate to 7 percent but leave the base unchanged, while Wolf’s plan would increase the sales tax rate to 6.6 percent and expand the sales tax base. The House plan also would not provide property tax rebates for renters as the governor’s plan would. While the House plan would provide even more funding for property tax cuts, ($4.9 billion vs. $3.9 billion under the governor’s plan) their package is essentially revenue neutral and does not include increased investments in public education which is a signature piece of the governor’s plan. The House Finance Committee is expected to vote on the House plan next week. Stay tuned to the Tax Justice Blog for a more in-depth analysis of tax reform efforts in Pennsylvania.

The Ohio House is set to approve Gov. John Kasich’s proposed tax cuts while nixing his proposals for new tax revenue. Kasich originally proposed $5.7 billion in income tax cuts and $5.2 billion in consumption tax increases over two years– specifically an increase in the sales tax rate from 5.75 percent to 6.25 percent, an expansion of the sales tax base, and increases in the commercial activities tax and severance tax on natural gas extraction. The House is expected to pass a smaller income tax cut and to reject all of the proposed tax increases; whereas the governor wanted to lower the top personal income tax rate to 4.1 percent, the House will likely reduce the rate to just under 5 percent. At the same time legislators blocked the governor’s proposed cuts in public school funding, a welcome but contradictory move.  Stay tuned to the Tax Justice Blog for a more in-depth analysis of tax cutting efforts in Ohio.

The South Carolina House approved a bill by a veto-proof majority that would increase the states gas tax by 10 cents and provide most residents with a modest income tax cut of $48. It is expected to generate $400 million in new revenue for road construction, tax cuts excluded. The margin of passage is important because Gov. Nikki Haley, who vowed not to increase the gas tax without significant income tax cuts, feels that the cuts passed by the House are not enough. The bill also does not contain the Department of Transportation reform measures demanded by Haley, who seeks to assert more control over road funding and construction. The Senate is also considering a road funding plan.

Following Up:
Florida: Senate President Andy Gardiner says the $600 million in tax cuts championed by Gov. Rick Scott and passed by the House last week are “on the shelf” until the fight over Medicaid expansion is resolved. Federal subsidies to Florida for healthcare providers who treat the poor are scheduled to expire, but the governor is resistant to expanding Medicaid coverage under Obamacare to make up for the lost revenue.

In Case You Missed It:

• ITEP released a report on undocumented immigrants’ contributions to state and local tax systems. The report found that undocumented immigrants paid an estimated $11.84 billion in taxes in 2012. Check out this blog post for more!
• In honor of Tax Day, the Tax Justice Blog highlighted the great work done by our state partners around tax issues.  

Despite its setting among rugged coastlines and quaint lighthouses, there will be nothing picturesque about the coming tax battle between Gov. Paul LePage and legislative leaders in Maine. The current debate is the latest in a string of Maine tax reform efforts; in 2013 the “Gang of 11” proposed an ambitious bipartisan plan that was dashed like a fishing boat along a rocky shore, and in 2009 lawmakers passed a tax package that was soundly rejected by voters at the polls.

LePage unveiled his budget proposal back in January, and it included a package of changes that would fundamentally change the way Maine taxes its residents. The governor wants to cut income taxes through across-the-board rate reductions. The threshold for the zero income tax bracket would increase from $5,200 to $9,700. Any income between $9,700 and $50,000 would be taxed at a reduced rate of 5.75 percent, and income between $50,000 and $175,000 would be taxed at 6.5 percent. Income beyond $175,000 would be taxed at just 5.75 percent – an outrageous concession to the already well-off.. His plan also increases the exclusion for pension income from $10,000 to $30,000, introduces a refundable sales tax credit (though the state’s nonrefundable Earned Income Tax Credit is axed under the plan), and boosts the state’s targeted property tax fairness credit.

LePage has gone on record as wanting to eliminate Maine’s income tax – most recently at a Tax Day press conference – calling it “an obsolete form of taxation.” If the state income tax were eliminated, half of Maine’s annual $3 billion in revenue would go with it.

LePage wants other provisions that would inordinately benefit wealthy Mainers as well. His plan would eliminate Maine’s estate tax at a cost of $85 million over four years, and the top corporate income tax rate would fall from 8.93 percent to 6.75 percent.

To pay for his proposed cuts, Gov. LePage wants to increase the sales tax rate to 6.5 percent and expand the sales tax base to include personal and professional services. He makes further changes to the personal income tax as well, including eliminating itemized deductions. He would also end the state’s practice of sharing revenue with municipalities, while allowing cities and towns to implement a new tax on large nonprofit organizations in their jurisdictions. Lawmakers and local officials fear this will upend municipal budgets and force property tax increases at the local level.

The governor’s plan would shift revenues from progressive income taxes to regressive sales and property taxes, and the state will net a revenue loss of $300 million if all changes take effect. The shift would also make state finances more volatile over the long run; as this ITEP brief explains, the income tax displays more robust growth over time than do sales and property taxes.

Last week, legislative leaders in the Maine House and Senate unveiled an alternative to Gov. LePage’s plan entitled “A Better Deal for Maine.” The alternative proposal would also cut income taxes and increase sales taxes, but the benefits would be targeted to middle-income Mainers rather than the wealthy. The average taxpayer with income under $167,000 would get an income tax cut, but the top personal income tax rate would remain untouched and many of the state’s richest residents would see a modest tax increase under the plan. Rather than increasing the 0 percent bracket, the alternative plan boosts the state’s standard deduction and phases out the benefit for upper-income taxpayers. 

The sales tax rate would remain at 5.5 percent, but the base would be expanded to include services, as it would under LePage’s plan. Like the governor’s plan, the alternative introduces a new refundable sales tax credit and increases the property tax fairness credit, but it retains the current pension exclusion amount.

The Better Deal alternative proposed by legislators does not eliminate revenue sharing with municipalities, as the governor would. Under the alternative plan, the Homestead Exemption property tax benefit would be doubled to $20,000 for all homeowners; under the plan proposed by LePage, the homestead exemption was doubled only for homeowners over 65 years of age. Unlike the governor’s plan, the alternative plan is revenue neutral.

An ITEP distributional analysis found that the “Better Deal for Maine” plan would provide bigger tax cuts for more Mainers while protecting investments in critical services like education. Under Gov. LePage’s plan, the average taxpayer in the top 5 percent of Mainers would see significant cuts, while the alternative plan would see taxes increase modestly for most in the same group. Overall, the alternative plan would make Maine’s tax system more fair.

The “Better Deal for Maine” plan has already won an opening salvo, garnering the support of many of the state’s major newspapers. The Bangor Daily News praised the alternative for its focus on reducing property taxes, which fall more heavily on the bottom of the income scale, than income taxes that are felt more heavily at the top. The Morning Sentinel and Kennebec Journal said in a joint editorial that the alternative plan would “boost demand and lead to economic growth” because it targets middle-class consumers rather than wealthy businesses.

An ITEP report released today found that the 11.4 million undocumented immigrants living in the US  contribute significantly to state and local taxes – to the tune of $11.84 billion in 2012, our analysis shows. Under the terms of President Obama’s executive actions on immigration that figure could increase by $845 million a year; if legal status were granted to all undocumented immigrants their state and local tax contributions would increase by $2.2 billion a year.  

Immigration reform efforts have languished in Congress since 2005, and more recently the House of Representatives failed to consider a comprehensive immigration bill passed by the Senate in 2013. A frustrated President Obama announced last November that he would offer temporary legal status to close to 4 million undocumented immigrants who are parents of US citizens or lawful permanent residents and who pass a background check. He also expanded his 2012 order to defer deportation for undocumented immigrants who arrived in the country as children. Roughly 5.2 million undocumented immigrants could benefit from the president’s 2012 and 2014 proposals.

In February a federal judge in Texas temporarily blocked the president’s executive actions in response to a lawsuit against the federal government by 26 states. Judge Andrew Hanen granted the injunction on the grounds that the suing states “would suffer irreparable harm in this case” were the executive actions enforced before the lawsuit wound its way through the federal judiciary, since a revocation of legal status would be extraordinarily unlikely and since the states would be forced to increase “investment in law enforcement, health care and education. 

Our recent report shows that granting legal status to undocumented immigrants would be a net benefit to states since these workers already contribute to paying for state and local services and would pay even more taxes were they allowed to work legally. In Texas, where the injunction was granted, undocumented immigrants already pay an estimated $1.5 billion a year in taxes, and under the terms of Obama’s executive actions they would pay an additional $57 million.

Despite contrary claims – similar to the falsehood that 47 percent of Americans do not pay taxes – the reality is that undocumented immigrants contribute to paying for local and state services. Those who make these arguments focus narrowly on federal income taxes, ignoring the sales, excise and property taxes to which all Americans contribute and which make up a significant share of taxes collected. Extending lawful permanent residence to those who are currently undocumented would be a positive benefit for the economy and the communities where undocumented immigrants live, allowing them to fully contribute and support the important work we do together.

Tax day is the perfect opportunity for legislators, the media, and taxpayers to be reminded who pays (and who doesn’t pay) taxes, how tax dollars are spent and about current tax policy debates raging in the states. The following is a compilation of tax day resources from the states:

Arizona: Through their blog, the Children’s Action Alliance wished everyone a “Happy Tax Day” and shed light on the important issue that “many corporations and higher income families owe little or no state income taxes.”

Calfornia: Right in time for Tax Day the California Budget and Policy Center released a new report Who Pays Taxes in California? The report highlighted ITEP data as well as the need to create a state Earned Income Tax Credit and better target existing credits to low income families.

Iowa: The Iowa Policy Project shared ITEP’s Who Pays? findings to shed light on the regressivity of the state’s tax structure

Georgia: The Georgia Budget and Policy Institute reminded Twitter followers to be thankful for the services that taxes pay for through #ThanksTaxes, they were interviewed by an NRP affiliate, and had their income tax materials prominently displayed on their website.

Michigan: The Michigan League for Public Policy put together this creative map showing what taxes pay for.

New Jersey: New Jersey Policy Perspective took the day to remind folks of three “takeaways” regarding taxes in the state. First, that all New Jerseyans pay taxes (with a link to ITEP’s Who Pays data), that corporations are often getting big tax breaks, and that taxes are an investment that provide opportunities.

North Carolina: The North Carolina Budget and Tax Center hosted a tax tweet on Tax Day so folks could share how their tax dollars are working in North Carolina. Followers were urged to share their thoughts using #thanktaxesnc

Texas: The Center for Public Policy Priorities (CPPP) shared this recent blog post to remind Texas taxpayers who pays state and local taxes. Also CPPP used Tax Day to shed light on a the tax debate there reminding lawmakers that Texas can’t afford tax cuts.

Washington: The Washington State Budget and Policy Center released a post It’s Tax Day! Let’s Talk About Washington’s Tax System. Since the state has the most regressive tax structure of them all, there is certainly a lot to say!

Wisconsin: The Wisconsin Budget Project creatively travelled and tweeted around the state with Casey Badger to show how tax dollars go to fund investments that Wisconsinites enjoy. They also published This Tax Day, Remember that Taxes Make Investments in a Strong Economy Possible.

We are still collecting tax day information and media. Already we know that ITEP’s Who Pays data have been cited in the Washington Post, a Dallas Morning News op-ed, an LA Times column, articles in the Topeka-Capital Journal and Mother Jones and in an editorial in the Wilmington Star (NC).

Idaho legislators ended their session very early on Saturday morning without enacting a regressive flattening of the state’s income tax.  Instead, lawmakers agreed to simply raise the state’s gas tax by 7 cents (the first increase in 19 years) and boost vehicle registration fees by $21.  Unfortunately, the bill also redirects some general fund dollars away from other core public services to spend on roads and bridges instead—but that feature of the law will lapse after two years.  Assuming Governor Butch Otter signs this legislation, Idaho will become the 7th state to raise or reform its gas tax in 2015.

The Florida House passed a $690 million package of tax cuts last week that now awaits approval by the Senate. The package of cuts closely resembles the proposal floated by Gov. Rick Scott in January and includes a cut in the communications services tax as well as tax cuts targeted at “small businesses, college students, military veterans, farmers, gun clubs, school volunteers, high-tech research, widowed and disabled homeowners.” Dissenting legislators argued that the impact of the revenue losses from the tax cuts would outweigh the benefit for most Floridians.

Following Up:
Alaska: While proposals to institute an income tax face an uphill climb, Alaska’s revenue problems continue to worsen. The state’s oil production tax is set to produce the least amount of revenue in its four decade existence, and state senators voted to repeal the state’s film tax credit program to save money.  

States Starting Session This Week:
Louisiana (Monday)

States Ending Session This Week:
Maryland (Monday)

North Carolina legislators are moving ahead with plans to double down on fiscally-ruinous income tax cuts less than two years after enacting a significant tax cut package that was heavily tilted to the Tarheel state’s richest residents. Senate Bill 526 would reduce the personal income tax rate from 5.75 to 5.5 percent, replace the standard deduction with a zero percent tax bracket for the first $20,000 of income, and reduce the corporate income tax from 5 to 4 percent. Worse, the bill would eliminate revenue benchmarks passed in 2013 that would have prevented corporate income tax cuts if revenue collections didn’t reach a certain level. All told, the tax cuts would cost at least $1.4 billion in revenue over the biennium. Currently, North Carolina faces a $271 million shortfall.

Luckily, opponents of the tax cut plan continue to sound the alarm. Alexandra Sirota of the Budget and Tax Center (BTC) blasted the proposed income tax cuts, saying previously-enacted cuts “have undermined the state’s ability to invest in infrastructure, in research and development at public universities and in many other public services that underpin a strong economy.” Sirota pointed out that some lawmakers who back further income tax cuts have sought to hedge their bets by securing more sales tax revenue for their districts – an implicit admission that revenue growth is unlikely to occur.

A recent BTC report found that the evidence gleaned from tax cuts passed in North Carolina in 2013 disprove the arguments that tax cuts create growth and attract businesses. While the state’s job growth since December 2013 has been slightly stronger than the national average, personal income and hourly wage growth in North Carolina have both trailed the nation. The report also cites an ITEP analysis which found that the 2013 tax cuts overwhelmingly benefited the wealthy and profitable corporations, and that the 2015 plan would send another $2,000 back to the top one percent of earners. 

Advocates aren’t the only ones condemning the plan. An editorial in The Charlotte Observer chides state lawmakers for their attempts “to fund the fiction that giving ‘job creators’ more money is good for North Carolina. Doing so ignores history, which shows there’s no link between lowering state taxes and economic growth. That’s because businesses spend money when they can make money, not simply because the government gave them more of it.”

Just over a month before announcing his run for president, Sen. Marco Rubio released a tax reform plan that provides trillions in deficit-busting tax cuts for the wealthy and corporations.

Some news outlets lauded the plan as a moderate approach on tax issues that stands in contrast to the supply-side tax cut plans of previous GOP presidential candidates. The only explanation for such misguided praise is that the plan, while top-heavy, also includes some tax cuts for middle-income Americans.  

Like many radical, rightwing tax plans before it, Sen. Rubio’s plan calls for elimination of taxes on capital gain and dividend income and movement toward a territorial corporate tax system. These two changes would lavish multinational corporations and the wealthiest Americans with trillions of dollars in additional tax breaks over the next decade.

In spite of these old hat ideological tax proposals, some commentators claim Sen. Rubio’s plan diverges from the supply-side plans of years past. Perhaps they are focused on the provision that would increase the child tax credit, taking it from a maximum of $1,000 to $2,500. In other words, Sen. Rubio’s plan attempts to make the massive tax cuts for the rich more palatable by also throwing a bone to low- and middle-income taxpayers.

The problem with this approach is that you can’t tax cut your way to economic growth and also pay for the nation’s basic priorities. Even with the tiny handful of revenue-raising offsets outlined in the plan, it would likely lose trillions of dollars in revenue over the next decade, ballooning the deficit to unsustainable levels or requiring draconian cuts in public investments.

Supporters of Sen. Rubio’s tax reform plan have attempted to use fantastical math to paper over gigantic revenue loss by arguing that the plan will cause such a surge in economic growth that it will more than pay for itself over the long term. Top-heavy tax cuts leading to economic growth is a familiar refrain that has been repeatedly disproven. The math of Sen. Rubio’s allies is so fantastical however, that even conservative economist Laurence Kotlikoff said that it would “not pass muster as an undergraduate’s model at a top university.”

Sen. Rubio’s newest tax deform plan is a much larger version of his gimmicky tax proposals of years past. In each case, he attempts to get credit for touting tax cuts, while at the same time hiding the real cost of his proposals. The crucial difference this time around is the sheer scale of the damage his tax reform plan would do to tax fairness, public programs and the U.S. economy if it were ever enacted.