Issue of the week: Rangel puts tax reform on the agenda

Rep. Charlie Rangel just fired

Rep. Charlie Rangel just fired “the opening salvo in the debate on tax reform,” said John Fout in TheStreet.com. The New York Democrat, who is chairman of the taxwriting House Ways and Means Committee, last week proposed what he called “the mother of all tax reforms.” Designed to be “revenue neutral”—that is, to leave the total amount of tax revenue unchanged—Rangel’s plan offers “a hefty reduction in the corporate tax rate” and lowers taxes on the middle class. It would also eliminate the Alternative Minimum Tax, a 1960s-era levy that was supposed to hit only the wealthy but is snagging a growing number of middle-class taxpayers. He’d pay for those cuts by socking wealthy taxpayers with a surcharge and taxing the earnings of hedge-fund and private-equity managers at ordinary income rates, instead of the 15 percent capital-gains rate. Ohio Republican Rep. John Boehner called Rangel’s plan “the mother of all tax hikes,” and said it would destroy jobs, hurt small businesses, and ultimately raise taxes on every American. Democrats, for the most part, tried to change the subject.

That’s because Rangel’s plan “has put Hillary Clinton and other high-profile Democrats on the spot,” said Glenn Thrush in Newsday. The Republican National Committee was quick to tie the Democratic front-runner to one of her most vocal supporters, labeling the proposal “the Rangel/Clinton plan.” In reality, though, “Clinton is, at best, lukewarm to the idea and is highly unlikely” to support it. But Rangel’s proposal is also “putting Republicans in a bind,” said Alison Fitzgerald in Bloomberg.com. By linking the repeal of the AMT to higher taxes on hedge-fund managers, Rangel has presented Republicans “with the politically painful options of voting for higher levies on wealthy investors or hurting middleclass voters.” That, complained GOP strategist Terry Holt, is “an awful choice.”

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