'Mother of All Tax Hikes' Not Exactly Reaganite Reform
When is “tax reform” really an enormous tax increase that could cause the middle and lower income to lose jobs?
Liberal Democratic Congressman Charles Rangel (D-N.Y.) has called his new tax plan the most comprehensive tax reform since 1986, even comparing it to the Tax Reform Act President Ronald Reagan signed into law in 1986. But some consider that disingenuous.
“The New Yorker is wily enough to realize he has to wrap this homely child in the ribbon of ‘tax reform,’ and yesterday he even invoked the memory of Ronald Reagan's 1986 reform success,” said an October 26 Wall Street Journal editorial.
“If only the Gipper were still here to have fun with that one. Readers of a certain age might recall that the 1986 reform traded lower tax rates (a top rate of 28%) for fewer loopholes and deductions. Mr. Rangel's idea of reform is to raise tax rates in order to offer more deductions,” continued the Journal.
Rangel told the Los Angeles Times, that it is an attempt “to restore equity and fairness to the system,” on October 26.
CNN’s “American Morning” interviewed Rangel on October 26 about the new bill. Although co-anchor John Roberts quoted criticism from Republican leaders, he ignored the specifics about the $3.5 trillion tax increase over 10 years—according to the
Rangel dodged Roberts’ questions when pressed if this was a tax increase for some Americans:
JOHN ROBERTS: “[B]ut Congressman Rangel, is this an indication that if a Democrat gets into the White House, for many people in
REP. CHARLES RANGEL: “Of course not! You keep saying that. The more you say it, the more people want to know whose taxes will be going up.”
ROBERTS: “But, some people’s taxes will increase?”
RANGEL: “If you are receiving a preferential tax treatment that you don’t deserve, you can call it what you want – a tax increase. We will be calling it a loophole …”
ROBERTS: “So, are you saying that high income earners are getting a preferential tax break now that they shouldn’t be getting?”
RANGEL: “The only reason that we can bring down the corporate tax rate is because under the higher tax rate some of the people are paying no taxes at all. So what we’re doing is pulling out the unfairness, lowering the rate and we’re doing the same thing for middle income taxpayers.”
But, despite Roberts’ tough questioning, the CNN onscreen graphic read “Major Tax Reform,” implicitly agreeing with Rangel’s perspective that his bill is a tax reform, not a massive tax hike.
Roberts didn’t ask all the tough questions though. According to an editorial in the October 26 Investor’s Business Daily, the bill would be “the largest income-tax hike ever, to punish the rich” and “that the middle class and poor would lose millions of jobs.” Not a word about job loss came up in the “American Morning” segment.
Another CNN reporter, Congressional Correspondent Dana Bash described Rangel’s bill by saying it “would give tax breaks to low and middle-income Americans and pay for it with a tax hike on high-income earners.” That was on the October 25 “Situation Room.”
But again, CNN wasn’t presenting a full picture for viewers.
According to the National Taxpayers Union the bill includes an enormous giveaway to people who already don’t pay taxes: “Rangel claims that ‘91 million families’ will benefit from the scheme, but that includes a spending giveaway to millions receiving the ‘Earned Income Credit’ -- households that don't pay taxes anyway.”
Rangel’s tax proposal will also eliminate the alternative minimum tax (AMT), which will hit 21 million taxpayers unless a temporary fix is passed this year, according to Treasury Secretary Henry Paulson quoted by USA Today.
But despite Rangel’s plan to eliminate the AMT, NTU said it will simply come in a new form.
“[Rangel] effectively resurrects it under a different name on the tax bills of millions of Americans. He boosts the standard deduction, only to erode the benefits of other common deductions. Families who would qualify as upper-middle-class in many metro areas would see their tax rates go as high as 44 percent, compared to the 35 percent or less they're now paying,” explained the NTU press release.
The October 26 Wall Street Journal agreed reporting that the replacement tax proposed by Rangel to cover the cost of the AMT repeal would mean “many wealthier taxpayers would pay the same or higher taxes compared to the AMT system.”
That replacement tax would be $831.7 billion dollars versus a tax-savings of $795.66 billion from the repeal of the AMT, according to the proposal on the House Ways and Means Committee Web site.
Other increases in taxes according to that proposal include:
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Taxation of carried interest as ordinary income – an increase of $25.66 billion.
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Current inclusion of deferred compensation paid by offshore hedge funds to investment managers – an increase of $22.64 billion.
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Repeal of domestic production activities deduction – an increase of $114.93 billion.
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Allocation of expenses and taxes on basis of repatriation of foreign income (deductions associated with expenses on foreign profits not subject to
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Repeal of last-in, first-out (LIFO) accounting method – an increase of $106.51 billion.
