'Mother of All Tax Hikes' Not Exactly Reaganite Reform
When is âtax reformâ 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.
âThe New Yorker is wily enough to realize he has to wrap this homely child in the ribbon of âtax reform,â and yesterday he even invoked the memory of Ronald Reagan's 1986 reform success,â said an October 26 Wall Street Journal editorial.
âIf 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,â continued the Journal.
CNNâs âAmerican Morningâ 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 yearsâaccording to the
Rangel dodged Robertsâ questions when pressed if this was a tax increase for some Americans:
JOHN ROBERTS: â[B]ut Congressman Rangel, is this an indication that if a Democrat gets into the White House, for many people in
REP. CHARLES RANGEL: âOf course not! You keep saying that. The more you say it, the more people want to know whose taxes will be going up.â
ROBERTS: âBut, some peopleâs taxes will increase?â
RANGEL: âIf you are receiving a preferential tax treatment that you donât deserve, you can call it what you want â a tax increase. We will be calling it a loophole âŚâ
ROBERTS: âSo, are you saying that high income earners are getting a preferential tax break now that they shouldnât be getting?â
RANGEL: âThe 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 weâre doing is pulling out the unfairness, lowering the rate and weâre doing the same thing for middle income taxpayers.â
But, despite Robertsâ tough questioning, the CNN onscreen graphic read âMajor Tax Reform,â implicitly agreeing with Rangelâs perspective that his bill is a tax reform, not a massive tax hike.
Roberts didnât ask all the tough questions though. According to an editorial in the October 26 Investorâs Business Daily, the bill would be âthe largest income-tax hike ever, to punish the richâ and âthat the middle class and poor would lose millions of jobs.â Not a word about job loss came up in the âAmerican Morningâ segment.
Another CNN reporter, Congressional Correspondent Dana Bash described Rangelâs bill by saying it âwould give tax breaks to low and middle-income Americans and pay for it with a tax hike on high-income earners.â That was on the October 25 âSituation Room.â
But again, CNN wasnât presenting a full picture for viewers.
According to the National Taxpayers Union the bill includes an enormous giveaway to people who already donât pay taxes: âRangel claims that â91 million familiesâ will benefit from the scheme, but that includes a spending giveaway to millions receiving the âEarned Income Creditâ -- households that don't pay taxes anyway.â
Rangelâs 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 Rangelâs plan to eliminate the AMT, NTU said it will simply come in a new form.
â[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,â 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 âmany wealthier taxpayers would pay the same or higher taxes compared to the AMT system.â
Other increases in taxes according to that proposal include:
Taxation of carried interest as ordinary income â an increase of $25.66 billion.
Current inclusion of deferred compensation paid by offshore hedge funds to investment managers â an increase of $22.64 billion.
Repeal of domestic production activities deduction â an increase of $114.93 billion.
Allocation of expenses and taxes on basis of repatriation of foreign income (deductions associated with expenses on foreign profits not subject to
Repeal of last-in, first-out (LIFO) accounting method â an increase of $106.51 billion.