Why you should care about Charles Rangel's tax plan

    As President Bush’s approval numbers continue to plummet, it’s worth taking a look back at how he got elected in the first place. In 2004, it was all about the war, national security and values, but 2000 was a different story. There were plenty of reasons to have voted for him his education plan, national security, his charisma – but one of the biggest was his tax cut plan. After all, who wouldn’t vote for getting a check from the government every year? Like much of Bush’s work, those tax cuts have come under intense scrutiny. Now a new tax proposal from New York’s Charles Rangel is threatening to end the tax cuts once and for all, in addition to radically changing how much we pay in taxes.

    Loyal readers may remember Rangel as the Mississippi-hating firecracker representative that wanted to reinstate the draft. As the Democratic chairman of the House Ways and Means Committee, he’s got power over the stuff that matters money. He’s exerted his power by unveiling what he calls “the mother of all tax reforms.” The gist of the reform is that it shifts the burden of taxation to the wealthy and corporations and eases the taxes for the middle- and lower-class. That involves rolling back Bush’s tax cuts, adding breaks for low- and middle-income households and increasing tax rates for the wealthy.

    Key to Rangel’s plan is scrapping the Alternative Minimum Tax, or AMT. The AMT is this broken little tax code that sounded great back in 1970 but ended up not being prepared for everything that followed. Like, you know, inflation. The AMT was set up to target high-income households that were getting so many tax breaks, they were paying almost nothing. It established a specific low (either 26 or 28 percent) that the taxes couldn’t dip below, forcing the high-income citizens to pay at least a little bit. Unfortunately, like tie-dye and pet rocks, the AMT’s popularity didn’t make it through the ’80s, especially since its inability to adjust to inflation means that it’s now targeting the middle-class.

    The 2006 IRS National Taxpayer Advocate Report highlighted the AMT as the number one tax problem in the country. Congress dealt with it like they do most issues: promising to address it later. But now that Rangel has put it on the table, AMT is likely a goner.

    Of course, that leaves the rest of the tax plan for Congress to debate. The proposal has gotten a rather tepid response; the Democrats are doing their trademark foot-shuffling, non-committal talk-around, while the GOP is fighting back with their trademark fire-breathing passion. Mitt Romney called the plan “the mother of all tax increases” and Rudy Giuliani lashed out at his fellow New Yorker for wanting to increases taxes for the wealthy. Opponents argue that this plan will curb economic growth (after all, who wants to be rich if you’re just going to have to give it all back to the government?) and place an unfair burden on small businesses.

    Meanwhile the Democrats have been slow to either support or oppose Rangel, probably shocked that one of their own took enough initiative to write up a controversial plan. They’ve stated before that they want to dump the tax cuts and divert that money towards health care and education reform, but never had a concrete plan in place. However, what response there has been has been lukewarm at best. Rangel stated that he wanted to work with the new president “no matter who she is,” on the new tax code, a not-so-sly reference to his favorite candidate (no, it’s not John Edwards). Still, Hillary hasn’t been eager to come out for the plan; no one seeking election wants to say they’re in favor of increasing taxes for the wealthy, not when that’s where they’re campaign money comes from. Besides, being branded as someone who wants to raise taxes is akin to taking a nap during DM.

    Still, the plan lays the groundwork for a contentious tax code revision. Rangel’s focus on easing off the middle class is good news for all of us graduating soon; must of us won’t be hooking up with cushy, high-income jobs for a while, so we’re safe from the directly negative effects. Instead, the middle- and lower-classes reap the benefits through lower taxes and health care and education programs that would presumably be funded through the shifted revenue. No matter what happens to Rangel’s plan, Bush’s tax cuts and the AMT are probably goners. Feel free to shed a tear next time you’re filling out your (lower) tax forms.


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