At the debate Tuesday night, Paul said that Rubio was unconservative in favoring an expansion of the military budget and the child credit–two policies that Republicans have supported off and on for decades. Paul is certainly entitled to try to change the way people think about what conservatism means. In the course of taking his shot, though, he made incorrect claims about Rubio’s tax plan. Here’s what Paul said about the child credit expansion:
We have to decide what is conservative and what isn’t conservative. Is it fiscally conservative to have a trillion-dollar expenditure? We’re not talking about giving people back their tax money. He’s talking about giving people money they didn’t pay. It’s a welfare transfer payment.
So here’s what we have. Is it conservative to have $1 trillion in transfer payments — a new welfare program that’s a refundable tax credit?
I am not sure where Paul got the $1 trillion estimate, but he is wrong to say that Rubio’s child credit involves “giving people money they didn’t pay.” The credit, as Rubio explained, would apply against the income taxes and payroll taxes people pay. (That would include the “employer’s share” of the payroll tax, which economists understand comes out of wages.) Some people would no longer pay taxes under the plan, but nobody would have a negative tax liability because of Rubio’s credit. Some people object to zeroing out people’s tax bills on the theory that if voters think they are getting government for free they will ask for more of it. But Paul can’t be one of those people, because his own plan involves making a lot of wage-earners free of tax bills they see in their pay stubs and instead levying a hidden value-added tax on them. And some people object in principle to having a child credit at all. But that’s not the argument Paul was making the other night, perhaps in part because his own plan includes a child credit.
In addition to misrepresenting Rubio’s tax plan, Paul gave, as he usually does, a misleading impression of his own plan. He noted that he gets rid of the payroll tax. What he doesn’t say is that his new VAT would take back most of people’s savings from the elimination of that tax. Paul wishes to maintain that establishing a VAT is the height of conservatism while tax relief for parents is a betrayal of conservatism. I don’t think most conservative voters will or should agree.
Update: Ryan Ellis and Pascal-Emmanuel Gobry have more on this topic.