It was fun to see Bloomberg's Al Hunt channel the Republicans in his interview with Charles Rangel the other day. Rangel has introduced a broad tax reform plan covering several parts of the code. Only one is really an issue leading up to a November 16 cutoff, but the exchange between Rangel and Hunt was a good preview of what wil come next year.
AMT (alternative minimum tax) mitigation has to be extended for another year or it will come down on millions of taxpayers in the upper middle class. The IRS and Treasury Department have been assured that Congress will pass the extension. The question is, Will they pay for it under the Pay-Go rule.
That means coming up with $48 billion in alternative revenue. Rangel likes taxing all income from hedge funds and money managers at the 35 percent income tax rate. Hunt challenged him with opposition from Rudy Guliani. Rangel said, If they have a problem, let them come forward and explain it.
Currently much of the take going to these multimillionaires is hidden in a bale of so-called "capital gains," even though hedge fund managers make no investment and others doing the exact same work are getting paid through the front door. Capital gains is taxed at 15 percent.
But nobody is going to come forward. The MO of those who want tax privileges is to bankroll candidates who will carry the water for them. Or if politicians like Rangel and the Progressive Democrats stand up, they bankroll their opponents.
Tax havens are worth millions to the right people. Tax fairness is only worth a couple of grand to you and me. It makes sense for the millionaires to invest in the political process. You and me can let the next guy to it.
The upshot? A tax code riddled with giveaways to big campaign donors.
The point that will be missed is the economic value of fairness. Rudy Guliani said the Rangel tax plan would be a disaster for the economy. He's busy carrying water. The real disaster is the Bush tax plan. Tax giveaways to the rich and not funding hte War in Iraq have left a huge liability overhanging our future. Never mind the baby boomers and the environmental collapse.
Back to Rangel
To counteract the political charade, Rangel is calling out the big donors/tax evaders. He told Hunt that anyone who felt the hedge fund manager proposal was harmful should speak out. "I don't expect anyone to come forward," he said.
Likewise those who are complaining about the reduction in corporate tax rates from 35 to 30.5 should speak up. The rate is being lowered by closing loopholes, including offshore tax havens. Some may call them "incentives," Rangel said. "If they think it's unfair, let them come forward and say so."
In Rangel's plan to be taken up next year, 91 million taxpayers will get relief. The earned income tax credit would be improved to the benefit of the working poor. So when Hunt picked up with, "Republicans say you're starting class warfare," Rangel replied, "They have picked the classes."
After 91 million are subtracted, there is a pretty tiny portion left at the top. Still, it's not only Guliani carrying water. Hillary and Chuck Schumer, all from New York, have "distanced themselves" from Rangel's proposal. Everybody needs campaign funds, I guess.