Rangel's Tax-the-Rich 'Reform'

Charles Rangel (Alex Wong - AP)

Meeting reporters for breakfast last week, Treasury Secretary Henry Paulson set as his tax priority a "patch" to slow the runaway alternative minimum tax (AMT). The former investment banker acted as though he was oblivious to plans by Rep. Charles Rangel, chairman of the House Ways and Means Committee, to turn the need for such a temporary fix into the most radical left-wing tax revision in half a century.

When one questioner asked whether Paulson contemplated recommending a presidential veto of AMT legislation, he indicated astonishment at the very idea. His only stated concern was that Congress had not patched the AMT -- originally intended to catch tax-evading millionaires -- this year to prevent it from wreaking havoc on middle-income Americans. Paulson uttered not a word about what Rangel is up to.

Rangel, having finally achieved his coveted chairman's role after years of waiting, wants to make history. His staff is hard at work on an audacious plan that over the next decade would redistribute up to a trillion dollars in American income through the tax system. Even if this package got through the House, it probably would be filibustered to death in the Senate, with a veto by President George W. Bush a last resort. But Rangel may really be aiming at 2009, envisioning a Democratic president and a filibuster-proof Democratic majority in the Senate.

Unlike the Republican Ways and Means chairmen over the previous 12 years, Rangel has a comprehensive tax strategy and a tactical game plan. His wedge is the AMT, the latest and most egregious lunacy imposed on the American taxpayer. In its present form, the AMT would raise $1.4 trillion in revenue over the next decade, through taxation of 23 million additional families this year alone. Congress regularly prevents this calamity by enacting a patch that limits AMT coverage to 4 million upper-bracket families.

But Rangel has refused to pass a patch, and he has not hidden his intentions. When Congress returned from its summer break, Ways and Means summoned the usual lineup of tax redistributionists for a Sept. 6 hearing on "fair and equitable tax policy for America's working families." Jason Furman, director of the Brookings Institution's Hamilton Project, deplored "the increase in inequality" caused by the Bush tax cuts, which he said "have exacerbated after-tax income disparities."

The day after the hearings, Rangel called in reporters to tell them that a one-year AMT patch is "not on the radar screen." Advocating total repeal, he promised to pay for $800 billion in lost revenue over the next 10 years with "the mother of all reforms."

Rangel talked about closing "loopholes," but the real money would come from drastically increasing the number of Americans paying the top income tax rate, 36 percent, and applying that rate to those who currently pay only capital gains taxes. Rangel also is considering the old millionaires' tax, but he would apply it to much more than millionaires: a surtax on household incomes over $200,000. All this would reverse the tide of across-the-board tax reduction begun by John F. Kennedy and Lyndon B. Johnson and renewed by Ronald Reagan.

While Rangel appears to be preparing for big-time tax increases in 2009, he is giving it a try in 2007. Something surely will be done to blunt the AMT this year, but Rangel is holding it hostage, with the ransom to be paid through left-wing tax revision. Even if this tactic will not enable passage of the mother of all reforms, it could force passage of more limited redistribution this autumn.

In his meeting with reporters, Paulson claimed to be puzzled that Congress had not yet passed an AMT patch. But he is not nearly so clueless. He understands Rangel's game and takes it seriously. Paulson views a tax increase as the worst possible medicine for today's economy.

Indeed, Paulson is alarmed that the U.S. advantage in tax policy is gone, with corporate taxes here now higher than those of foreign competitors. However, cutting corporate taxes, no matter how desirable for the sake of American prosperity, is no part of Charlie Rangel's desire to make history.

? 2007 Creators Syndicate Inc.