This article is from the archive of our partner National Journal

This week, Sens. Marco Rubio and Mike Lee introduced a GOP tax reform plan that could serve as a preview of Rubio's agenda if he makes a White House bid—but some conservatives already are skeptical.

For businesses, the plan would put the corporate tax rate at a single 25 percent rate and allow firms to deduct 100 percent of expenses, which the lawmakers say would account for the costs of capital investments the year they are made. Dividends and capital gains would not be taxed on the individual level, meaning any money made on many investments would not be subject to tax.

James Pethokoukis, a fellow at the conservative American Enterprise Institute, said while he is supportive of most of the plan, he thinks it could be difficult to sell to working families the idea that wealthy individuals would not have to pay individual capital gains taxes—even if it is more economically sound and the money still is taxed at the corporate level.

"A lot of people will see that as a throwback to the last campaign," Pethokoukis said, offering this example: How would people react to hearing that someone like Mitt Romney doesn't have to pay individual capital gains taxes?

He said because of the losses in revenue that would come from changes on both ends of the tax code, the proposal would need to be part of a larger plan to reduce the deficit—a plan that would include entitlement reform. "They need to explain how to pay for this or how it plays into entitlement economic reform," he said. "They need to explain how all of these pieces work together."

Rubio and Lee don't say when their proposed changes would be implemented.

The plan would also create a new child tax credit worth up to $2,500 for every qualifying child, which Rubio and Lee say will provide relief for working families who pay payroll taxes and help raise the next generation of people who contribute payroll taxes.

Pethokoukis said he thinks the credit can be beneficial for working families who are still struggling. "What we've seen in the economy is the fruits of economic growth is not being evenly distributed," he said. "You can't have a strong economy without strong families."

The proposal could boost Rubio's appeal to middle and low-income families should the senator make a run for the White House. Chris Bond, communications director for the reform-conservative-minded YG Network, said the plan's child tax credit especially could get some voters to consider Rubio. "Where the GOP is lacked in recent election cycles is articulating exactly how our governing vision would make life better for middle-class families," Bond said. "Things like the child tax credit allows them to keep more of what they earn."

Rubio and Lee's plan would split the individual tax rate into two brackets, with individuals making up to $75,000 and married couples making up to $150,000 taxed at 15 percent. Individuals and couples earning more than both totals would be taxed at 35 percent. In other words, people earning higher incomes would be taxed at greater rates than those earning lower incomes.

Changes in the tax code are hot on the minds of a few other 2016-minded Republicans. At last week's Conservative Political Action Conference, Kentucky Sen. Rand Paul, said he would soon propose the largest tax cut in history. Like Rubio, Paul has proposed eliminating taxes on capital gains and dividends, as well as the estate tax. Meanwhile, Texas Sen. Ted Cruz has proposed abolishing the Internal Revenue Service and moving to a flat tax.

Rubio and Lee's plan differs from most Democratic proposals. Where the pair's plan would eliminate the capital gains taxes on an individual level, the Obama administration has proposed raising the capital gains rate to 28 percent. In addition, the White House's tax proposal would increase the maximum child care tax credit to $3,000 per child for middle-class families.

Alan Viard, a resident scholar at the American Enterprise Institute, said Rubio and Lee's plan works to straddle both ends of the conservative debate on taxes, with one side trying to enact business tax reform and the other side trying to expand the child tax credit.

Even the praises from conservatives are met with reservations that allowing business to deduct expenses and eliminate capital gains taxes alongside expanding the child tax credit would lead to a loss of revenue.

"We're not going to effectively promote long-run growth with a plan that adds a large mount to the deficit," Viard said.

In fact, Democrats have already started hitting back. After the plan was released Wednesday, Democratic National Committee Chairwoman Rep. Debbie Wasserman Schultz, who has been considered a potential candidate for Rubio's Senate seat, released a statement criticizing Rubio's proposals as more of the same old Republican ideas.

"Rubio's tax plan shifts the burden onto working Americans and those hurting the most while propping up the very rich and offering tax breaks for corporations," Schultz said, adding it would increase the deficit.

This article is from the archive of our partner National Journal.

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