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Charles Rangel on Tax Reform

Dem./Lib./Working-Families


Additional surtax of 5.4% on top tax bracket

Obama and Congress are going to push for increases on taxes for the wealthy. In his 2011 budget, Obama calls for going back to the pre-Bush top bracket of 39.6% from the current level of 35%. Meanwhile, House speaker Nancy Pelosi and Ways and Means committee chairman Charlie Rangel want to raise taxes on the top bracket even more by imposing an additional surtax of 5.4%. The House passed just such a surtax as part of their Obamacare bill in 2009. Other proposals involve increasing the Medicare tax and changing the FICA (Social Security) tax so that we have to pay it on our entire income, not just the first $100,000 as at present.

Right now, the top marginal tax rate in the US is about 42% (35% federal, 2.9% Medicare, & an average of 4% of state and local income taxes). [Under the Democrats' plans,] at 52.9%, the top rate under this plan would be "higher than the top rate in all but three countries in the OECD: Denmark (60%), Sweden (56%), and Belgium (54%)."

Source: Take Back America, by Dick Morris, p. 63-64 , Apr 13, 2010

Zeal for capital gains & wealthy tax cuts is unparalleled

At this time we find this administration is still committed to not taxing anything except wages. Its zeal for cutting taxes on capital gains, estates, corporations, and the wealthy is unparalleled in my 35 years in Congress. At the same time, the administration and congressional Republicans continue to reduce aid to the states, money that the states must in turn replace by hiking regressive property and sales taxes. At the end of the day, then, the entire tax system is being shifted to the state, local and regressive and away from the national and progressive. This shift in Republican tax strategy--paying for tax cuts by borrowing--now shatters the myth that the Democratic Party is one of "tax and spend." All of the tax cuts that we Democrats offer as alternatives are more progressive and they are offset by cutting spending in other programs over which our committee has jurisdiction. That makes us the fiscal conservatives today.
Source: A Bad Day Since, by Charles Rangel, p.255 , Aug 5, 2008

Estate tax only reaches estates over $100M; don't cut it

It is so easy, politically, to vote consistently to cut taxes on the wealthy. It's just so seductive. I've had members of Congress support the repeal of the estate tax, a tax that only reaches estates over $100 million. I asked them, "How could you do that? Do you know anybody in your community who would benefit from it? Have you even read about anybody in your community who would benefit?" They say no on both counts, and then add, "But maybe one day we'll be rich, too."

It has been said that their constituents feel the same way about the wealthy and their wealth. But as for the Congress, I think the main reason a representative or working- or lower-middle class Americans supports this kind of tax cut is that they hope to get campaign contributions from the ultra-rich. I'm leading the fight against the repeal of the estate tax because I believe that this tiny fraction of Americans have such a large share of the wealth that they ought to pay an equitable part of that to the federal treasury.

Source: A Bad Day Since, by Charles Rangel, p.265-266 , Aug 5, 2008

Voted YES on extending AMT exemptions to avoid hitting middle-income.

Congressional Summary: Amends the Internal Revenue Code to:
  1. increase and extend through 2008 the alternative minimum tax (AMT) exemption amounts;
  2. extend through 2008 the offset of personal tax credits against AMT tax liabilities;
  3. treat net income and loss from an investment services partnership interest as ordinary income and loss;
  4. deny major integrated oil companies a tax deduction for income attributable to domestic production of oil or gas.
Wikipedia.com Explanation: The AMT became operative in 1970. It was intended to target 155 high-income households that had been eligible for so many tax benefits that they owed little or no income tax under the tax code of the time. However, when Ronald Reagan signed the Tax Reform Act of 1986, the AMT was greatly expanded to aim at a different set of deductions that most Americans receive.

The AMT sets a minimum tax rate of 26% or 28% on some taxpayers so that they cannot use certain types of deductions to lower their tax. By contrast, the rate for a corporation is 20%. Affected taxpayers are those who have what are known as "tax preference items". These include long-term capital gains, accelerated depreciation, & percentage depletion.

Because the AMT is not indexed to inflation, an increasing number of upper-middle-income taxpayers have been finding themselves subject to this tax. In 2006, an IRS report highlighted the AMT as the single most serious problem with the tax code.

For 2007, the AMT Exemption was not fully phased until [income reaches] $415,000 for joint returns. Within the $150,000 to $415,000 range, AMT liability typically increases as income increases above $150,000.

OnTheIssues.org Explanation: This vote extends the AMT exemption, and hence avoids the AMT affecting more upper-middle-income people. This vote has no permanent effect on the AMT, although voting YES implies that one would support the same permanent AMT change.

Reference: Alternative Minimum Tax Relief Act; Bill H.R.6275 ; vote number 2008-455 on Jun 25, 2008

Voted YES on paying for AMT relief by closing offshore business loopholes.

H.R.4351: To provide individuals temporary relief from the alternative minimum tax (AMT), via an offset of nonrefundable personal tax credits. [The AMT was originally intended to apply only to people with very high incomes, to ensure that they paid a fair amount of income tax. As inflation occurred, more people became subject to the AMT, and now it applies to people at upper-middle-class income levels as well. Both sides agree that the AMT should be changed to apply only to the wealthy; at issue in this bill is whether the cost of that change should be offset with a tax increase elsewhere or with no offset at all. -- ed.]

Proponents support voting YES because:

Rep. RANGEL: We have the opportunity to provide relief to upward of some 25 million people from being hit by a $50 billion tax increase, which it was never thought could happen to these people. Almost apart from this, we have an opportunity to close a very unfair tax provision, that certainly no one has come to me to defend, which prevents a handful of people from having unlimited funds being shipped overseas under deferred compensation and escaping liability. Nobody, liberal or conservative, believes that these AMT taxpayers should be hit by a tax that we didn't intend. But also, no one has the guts to defend the offshore deferred compensation. So what is the problem?

Opponents recommend voting NO because:

Rep. McCRERY: This is a bill that would patch the AMT, and then increase other taxes for the patch costs. Republicans are for patching the AMT. Where we differ is over the question of whether we need to pay for the patch by raising other taxes. The President's budget includes a 1-year patch on the AMT without a pay-for. That is what the Senate passed by a rather large vote very recently, 88-5. The President has said he won't sign the bill that is before us today. Republicans have argued against applying PAYGO to the AMT patch. In many ways PAYGO has shown itself to be a farce.

Reference: AMT Relief Act; Bill HR4351 ; vote number 2007-1153 on Dec 12, 2007

American People's Dividend: Give $300 to every person.

Rangel adopted the Progressive Caucus Position Paper:

The Problem

President Bush argues that upper income people pay a larger share of the taxes, therefore they should get a larger tax cut. We disagree. These people have significantly benefited from the economic boom of the 1990s, while those in the bottom range of incomes have received little benefit. It’s these folks that we must help. President Bush’s plan is “Reaganomics” revisited and it’s fiscally irresponsible. Despite spending $1.6 trillion or more, the President’s tax plan gives little to nothing for those with little income. In fact, anyone below 140% of the poverty line, will get a zero tax cut.

The Solution

The Progressive Caucus believes that tax relief must flow to those who need it the most, the working class and people with limited incomes. We have endorsed an idea called the American People’s Dividend. We’ll give a dividend to every American, because every American is an equal shareholder in America. We estimate the total cost to be about $900 billion over 10 years. The plan will give to every person about a $300 refundable tax credit. A married couple with 3 children will receive $1500, $300 for each member of the family. This plan is simple, easy to administer, and progressive. The plan could provide an economic stimulus since it would put money in people’s pockets immediately. Unlike the Bush proposal, which reserves 40% of the tax benefits for the wealthiest 1% of the population, our proposal gives the wealthiest 1% exactly 1% of the tax relief. This makes the bulk of tax relief available for the bulk of the population. The American People’s Dividend is payable every year the federal budget is in surplus.
Comparison of Progressive Tax Plan & Bush’s Plan
The WealthyThe Low Income
Progressive Caucus American Peoples Dividend$300$300
President Bush’s Tax Cuts$$46,000$0
Source: Progressive Caucus Press Release, "Tax Relief" 01-CPC2 on Feb 8, 2001

Member of House Ways and Means Committee.

Rangel is a member of the House Ways and Means Committee

The Committee of Ways and Means is the chief tax-writing committee of the United States House of Representatives. Members of the Ways and Means Committee cannot serve on any other House Committees, though they can apply for a waiver from their party's congressional leadership. The Committee has jurisdiction over all taxation, tariffs and other revenue-raising measures, as well as a number of other programs including:

The U.S. Constitution requires that all bills regarding taxation must originate in the House of Representatives. Since House procedure is that all bills regarding taxation must go through this committee, the committee is very influential, as is its Senate counterpart, the U.S. Senate Committee on Finance.
Source: U.S. House of Representatives website, www.house.gov 11-HC-WM on Feb 3, 2011

Minimum tax rate of 30% for those earning over $1 million.

Rangel co-sponsored Paying a Fair Share Act