Rangel’s Massive Tax-Increase Plan Gets Nearly Zero Old Media Coverage
Did you realize that Congressman Charles Rangel fully intends to enact a massive tax increase this year?
Oh, you thought that the Harlem representative only wants to fix and/or eliminate the dreadful Alternative Minimum Tax (AMT).
If you know otherwise, it’s probably only because you read Robert Novak’s September 17 syndicated column, which is the only meaningful coverage of Mr. Rangel’s plans I have seen (HT to a NewsBusters e-mailer). In it, Novak revealed what Old Media either doesn’t care to cover, or appears to not want you to know (bolds are mine):
Rangel Making History
Rep. Charles Rangel, chairman of the House Ways and Means Committee, (intends) to turn the need for ….. a temporary tax fix (to AMT) into the most radical left-wing tax revision in half a century.
Unlike the Republican Ways and Means chairmen who preceded him 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. Its present form 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 what he has in mind.
….. Rangel called in reporters (on September 7, the day after Sept. 6 hearings — Ed.) to tell them an AMT “one-year patch is not on the radar screen.” Advocating total repeal of AMT, 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 36 percent income tax rate and applying that rate to present capital gains taxpayers. Rangel also is considering the old millionaires’ tax, but applying 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 for 2007.
A Google News search on “Rangel Alternative Minimum Tax” (with only the last three words in quotes) shows little coverage, and almost no indication that anyone recognizes the existence of the tax hikes Congressman Rangel envisions. The same search at the New York Times shows no coverage since July 30. The fact that the net tax increase will theoretically be zero is really no excuse, as the press has obsessively covered the “who gains, who loses” angle in previous tax legislation.
So, why is a possible trillion-dollar tax increase on a large percentage of taxpayers, while granting relief to a relative few, not news?
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UPDATE: A NewsBusters commenter pointed to this. If this doesn’t make your blood boil, you might be dead –
Can’t Take My Eyes Off of Me
July 20, 2007New York’s Charlie Rangel provoked smirks this week when news emerged that the Harlem Congressman was humbly seeking a $2 million earmark to create a “Charles B. Rangel Center for Public Service” at the City College of New York.
Titters turned to dropped jaws yesterday when a 20-page glossy brochure popped up, describing the yet-to-be-created center. That flyer, which asks for donations, explains that organizers need a mere $4.7 million to restore a “magnificent Harlem limestone townhouse” that will house the center, plus another $2.3 million endowment for its operating costs.
I can see why Puddle Pirate said what he said in his comment below.
….because it won’t pass?
Comment by meep — September 22, 2007 @ 1:46 pm
I’m not surprised by anything this loathsome turd does. He’s responsible for my first violation of my own no-cursing policy.
Comment by The Puddle Pirate — September 22, 2007 @ 1:58 pm
#1, that is a good theory, but his party controls Congress, and only needs 8-10 GOP senatorial dummies to get to Bush’s desk.
Combined with Amanda Carpenter’s column on the possibility of a govt. shutdown over military expenditure authorization and perhaps tax legislation like this, and Rangel getting his way is not out of the question:
HERE
Comment by TBlumer — September 22, 2007 @ 2:05 pm
The media has been attempting to raise a new boogey man for the public to fear, well not new just another not so new weapon in the hands of the IRS. There have been plenty of scare mongering that the average American taxpayer is going to get sucked into the dreaded Alternative Minimum Tax (AMT) because of Congress’s failure to index the tax for inflation as they did for the regular income tax code. Then it is said Congress doesn’t have the financial means to fix their problem, so somehow all this becomes our problem, not theirs.
From what I understand of the AMT from the CBO is that currently 4 million people who otherwise would pay none or less taxes are now paying $50 billion a year in taxes. This works out to $12,500 extra per affected tax payer. The federal government takes in $2.8 trillion a year in personal income tax from all of us as of first quarter 2007. Tax receipts from personal income taxes increased $57 billion over just the last quarter from 2006 IV to 2007 I, but for some reason Democrats can’t eliminate the AMT, hmmm? http://www.bea.gov/bea/dn/nipaweb/TableView.asp?SelectedTable=84&FirstYear=2004&LastYear=2006&Freq=Qtr&3Place=Y (you need to update the chart by putting in 2007 Q under Last Year) According to the CBO, within 10 years (not next year) a total of 23 million people will be paying $100 billion/year. This works out to an extra $4,347 per tax payer paying the AMT, which a 1/3rd less than now. Somehow this is onerous? Looking at the CBO chart Box 2, http://www.cbo.gov/ftpdoc.cfm?index=5386&type=0&sequence=0 the amount of tax we are talking about a family of 4 making $139,000 pays an extra $259 over their regular tax bill of $20,000+! How many of you are paying $20,000 in taxes? Claiming it’s the end of the world because you pay the AMT, is like saying someone has herpes because they got chicken pox or cold sores. It’s technically true but disingenuous. Also please note the effective tax rates are around 15% at the end of the whole process. However, the idea someone making $50,000 is going to pay the AMT is just absurd and few of those who have written on this topic have failed to prove under what circumstances such a thing could happen. I would also remind everyone, that even if your deductions should somehow tip you into the AMT (which I surely doubt under a $75k), you are not required by tax law to take that 12th or 13th child as a deduction (some of the extreme examples offered to date), you can opt not to and so escape the AMT. The same goes for medical deductions. It doesn’t take an accountant to run a tax program like Turbo Tax or Tax Cut on your computer to find the tipping point for the AMT for your situation. All one needs do is just back track to drop a deduction, the program recalculates the taxes and so it is up to you whether loosing an exemption or deduction saves you money.
For those who want to get the real information on the AMT, check out the CBO website. While the article was written in 2004, it is still accurate. Pay close attention to Box 2 where they put up the chart showing the examples of what the AMT does. Note their projections for this example are based on you getting a 5% annual increase in salary. I don’t know about you all, but I haven’t seen my wages increase by 5% since the late 80’s, just the cost of living.
Looking at the CBO report, please note their chart (Figure 1) on the number of people affected by the AMT. The first thing you will note is that the number went up precisely at the time the Bush tax cuts went into effect, in other words those people didn’t get the benefit of the tax cut like many of us. Follow the chart along a little farther and you see the huge reduction of the number of tax payers affected by the AMT, precisely the time when the tax cuts are scheduled to sunset in 2010. Btw- It’s off by a year in 2011 because we all settle up with the IRS the following year. Also note that the chart depicts the amount of money the AMT will collect during this period, this is deceptive, because that money would have been collected without the tax cuts under the normal taxation scheme. So in reality, not everyone benefited from the Bush tax cuts, namely the upper middle class.
Looking further along the chart we see the amount the AMT collects gets greater again beyond 2010. As already pointed out, at the compounding of 5% annual increase in wages this projection is unrealistically high. However, regardless of the percentage you choose, the fact is the AMT only grows as the “economy†grows. We need to be reminded that the Bush tax cuts spurred the economy and hence tax collections have increased for all forms of taxation relative to economic growth. The AMT can not collect more tax unless your income grows.
Somehow I think we are all being snowed by disinformation and I suspect that it’s really for the benefit of those who pay less than their fair share of taxes. An interesting article in the New Republic of all places. http://www.tnr.com/doc.mhtml?i=w070409&s=sawicky041307 How can I say that, because the AMT forces a person to pay no less than 26% of their income after certain exemptions when they make hundreds of thousands of dollars. Those people making millions of dollars are socked with a 35% tax rate and thus escape the AMT, boy aren’t they sorry! I normally don’t go for class warfare arguments but whether you make $10,000 or a $1 million, you should pay your fair proportionate share. The AMT is a non-graduated tax or flat tax rate system, which is what we were trying to get to under Reagan. We can quibble about the percentage but in order to participate in this Republic you should be paying your fair share. It is inherently unfair for a millionaire or billionaire to pay little or no taxes percentage wise by the use of clever accountants and tax loopholes. Remember 5% of the population holds 70% of the personal wealth of the country, which has nothing to do with fairness but the ability to make money. If you make that kind of money, you should have no problem with paying a nominal income tax that the rest of us pay at the very minimum. We can also quibble about the progressive tax system as being discriminatory against those who produce more, I would agree on that, which is why I favor a single tax rate for everyone with a certain cut off for the poor. It makes for bad fiscal policy to penalize those who create wealth because that wealth if left to it’s natural progression will compound future wealth as the Bush tax cuts have proven. It also makes no sense to collect tax money from poor people who in turn just get it back in government services. People spend their own money better than the government does and by the opposite side of the coin I contend, they don’t spend “free†money (EIC) given to them wisely either.
In general I agree that high tax rates are bad for the economy and stifle job growth. I rather think this whole misinformation campaign is to give certain people an escape from paying income taxes. If I have to pay income tax, so do you. Fair is fair. Democrats have proposed a surcharge of 4% to correct this supposed problem and dropping the Bush tax cuts. Basically, everyone goes back to paying what Clinton demanded and if you somehow paid less, you then get the AMT with an extra 4%. It doesn’t take a genius to realize rich people are better at wealth creation than poor people. Democrats just don’t get it, higher taxes on those who produce wealth reduces the compounding effect of wealth creation by those who are the most efficient at it.
Comment by dscott — September 24, 2007 @ 8:27 am
“From what I understand of the AMT from the CBO is that currently 4 million people who otherwise would pay none or less taxes are now paying $50 billion a year in taxes.”
This is totally untrue. I don’t know anything about CBO report, but I do know that many of my collegues are affected by it. I am not (yet) simply because I have no kids. And we don’t have millions. We work for living for a company and pay taxes through payroll deduction. If you work for a company, you don’t have that many deductions, do you? The fact is, if you live in a high tax state like NY or California and have a couple of kids you can be hit by AMT. Yes, you’ll be earning over 75K, maybe even 100K. But earning over 100K for Southern NY State or California where the average house costs over 500K doesn’t make you a millionair.
Moreover, even if you earn 30K, but have one year in which you have some capital gains which make you earn over 100K in one year (for your salary only to drop back to 30K the next) can get you hit with AMT if you live in high-tax state like NY.
Pray tell what fairness is it in making state taxes non deductible under AMT? Are only rich people paying state taxes or live in high-tax states?
Comment by kitty — September 25, 2007 @ 3:27 pm
Just wanted to add that I don’t agree with Rangel’s plan, specifically of his provision to tax upper middle class. I am actually pretty angry that because of his plan, there is still no decision on 2007 AMT patch, so we cannot even predict on whether or not we’ll be hit with it.
Comment by kitty — September 25, 2007 @ 3:43 pm
#4, the problem with AMT is that it doesn’t allow deductions for things that should be legitimate deductions, at least until we get to the FAIR TAX promised land.
#5 and #6, the AMT uncertainty is really unfair to affected people, who basically have to stay in freeze mode, then run around like mad people near the end of the year. Rangel could care less.
Comment by TBlumer — September 25, 2007 @ 4:13 pm
Well Tom, I guess that depends on who’s ox is being gored. In the CBO example I cited, a family of 4 making $139k falls into the AMT and pays an extra $259.00 on top of a $20k tax bill. In my view, that merits a big whoopdedo! I understand the issue of deductions that are not allowed, however, it only resulted in an extra $259.00. That’s the point of the AMT, disallowing tax deductions which would excessively shield income. Again I refer you to the CBO report where at the end of the process the “net effective” taxation rate is essentially the same for those who fall into the AMT. I find it ironic that that many of us who disaprove of the progressive income tax and overly complex tax code should see the AMT as a bad thing when in effect it strives to make “net effective” taxation the same for everyone.
The point of a capital gains in one year is valid, however, anyone who plans on getting a large capital gain should do a two step sale (Dec 30 & Jan 2) to split the gains into two separate years. So in #5’s example of a $100k capital gain, that would be cut in half to $50k. Anyone making that kind of serious capital gain has to get advise from a tax accountant in any event.
When you say the Fair Tax are you talking about the proposed National Sales Tax? If so, I’m against it. I am for what Reagan was attempting to do, simplify the tax code, just slap everyone with a 15% income tax, no deductions, no capital gains, blah, blah, blah and make everyone say making over $10k (personal exemption) on a per person basis pay 15% on the remainder. Hence no marriage penalty. In my example, a family of four would have to make more than $40k to pay any tax at all, then 15% on anything in excess. So if a family of four pulls in $50k, they paid 15% on $10k which is $1,500 for the year. So the family of 4 making $139k would deduct $40k and pay on $99k income at 15% yielding $14,850. If you insist on tax deductions I would only do it for “catastrophic” medical expenses, but that would be about it.
Comment by dscott — September 26, 2007 @ 3:45 pm
I understand that AMT can be seen as a backdoor flat tax, but it ends up being on gross income, while the rest of the tax system is based on AGI less deductions blah blah. If everyone fell under AMT and the rate was low enough, it might be plausible, but I don’t see that in this century.
I am for the FAIR tax. Go to FairTax.org and watch the vid. It would end withholdings, tax filing, and so much more. The economy would grow like crazy if it ever happened.
Comment by TBlumer — September 26, 2007 @ 7:25 pm