Rubio says spending cuts must accompany tax overhaul

Senators Marco Rubio (R-FL) and Pat Toomey (R-PA) speak as they walk to the Senate Chamber to vote on legislation for funding the Department of Homeland Security on Capitol Hill in Washington March 2, 2015. REUTERS/Joshua Roberts (Reuters)

By Andy Sullivan WASHINGTON (Reuters) - U.S. Senator Marco Rubio, a likely Republican presidential candidate in 2016, on Wednesday unveiled a plan to reduce taxes for multinational corporations and parents, but it would widen federal budget deficits without cuts to popular health and retirement programs. The Florida senator's tax plan, introduced with Utah Republican Senator Mike Lee, would close loopholes and simplify the U.S. tax code, introduce new deductions for parents. In an effort to spur economic growth, it would encourage businesses to spend on computers, tractors and other equipment rather than taking on debt. It would also eliminate taxes on dividends and capital gains, but limit the popular deduction for mortgage interest payments. Like other ambitious tax-reform efforts, the plan is not likely to become law this year but could be a significant part of Rubio's pitch to voters if he decides to run for president. "I hope these ideas are embraced by everybody running for president, because I think our party needs to be the pro-family, pro-growth party," he told a news conference. While congressional scorekeepers have not analyzed Rubio's plan, outside experts at the nonpartisan Tax Policy Center have found that a similar one outlined by Rubio and Lee last year would reduce the government's tax haul. Without additional spending cuts, it would widen budget deficits. Rubio said Washington would have to reduce spending on popular retirement and health programs to cut the deficit. "Our generation is going to have to accept that our Medicare and Social Security is going to be different from our parents," he said. The plan would lower the U.S. corporate tax rate from 35 percent to 25 percent, and allow businesses to write off capital expenses the year they are purchased, rather than stretching deductions over years or decades. It would remove incentives that encourage businesses to take on debt, as well as tax breaks for a range of interests, from wind power to paper mills, that are regularly extended by Congress. Multinational companies would no longer have to pay tax on income earned overseas that they want to return to their headquarters in the United States. The plan would simplify personal tax rates to two levels: 15 percent for joint filers who earn up to $150,000 and 35 percent for income above that level. Parents would get a bigger tax credit of up to $2,500 per child, up from the current $1,000 maximum. (Additional reporting by Susan Heavey)