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Democrat Proposes Overhaul Of Taxes

Sen. Charles Rangel (D-N.Y.) calls his plan
Sen. Charles Rangel (D-N.Y.) calls his plan "the mother of all reforms." (By Mark Wilson -- Getty Images)

Rangel's Republican counterpart on the Ways and Means committee, Jim McCrery of Louisiana, attacked the plan as "the largest individual income tax increase in history." And Treasury Secretary Henry M. Paulson Jr. said the proposal "would hinder America's ability to compete in the global economy."

Rangel described his creation as an attempt "to restore fairness and equity to the system."

He did not disclose the details of another piece of tax legislation that he has said he would push to a vote soon. He and other Democratic congressional leaders said they would alter the alternative minimum tax so that it would not affect middle-income taxpayers this year.

The AMT was designed in the 1960s to prevent the super-rich from using loopholes to escape tax liability. But it was redrafted in later years so that it now threatens to increase the tax burden on roughly 21 million unsuspecting taxpayers of lesser means.

Rangel has said he would "patch" the AMT this year and also extend several tax breaks that are set to expire at year end. But he did not disclose how he would pay for those changes, which could cost as much as $65 billion. Congressional rules require that tax cuts be offset with tax increases or spending reductions, though lawmakers have been debating whether to waive the pay-for rules for this stopgap bill.

Rangel has indicated that he is likely to include the tax increase on the income of private- equity firm managers, also known as carried interest, as part of the stopgap effort. Senate leaders have said they are not eager to move such a provision through their chamber this year.

Paulson yesterday urged Rangel to pass the patch quickly and do so "without raising any other taxes."

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