Rep. Charlie Rangel, D-N.Y., chairman of the tax-writing House Ways and Means Committee, will play a central role in crafting legislation on climate change and health care, the White House’s two top priorities this year.
Because these bills present immense potential for corporate welfare, special favors and rent-seeking, Rangel’s apparent tendency to turn policy debates into fundraising drives deserves some study.
In his first two years as Ways and Means chairman, Rangel, who ran virtually unopposed last fall despite a slew of ethical troubles, raised $5.1 million. In comparison, the two Republican Ways and Means chairmen from 1995 to 2007, former Reps. Bill Archer, Texas, and Bill Thomas, of California, raised only $4.2 million, combined, over the entire courses of their chairmanships. Rangel, in other words, raised considerably more in one election than his Republican counterparts did in six cycles.
Studying his campaign finance records helps reveal how Rangel has turned the gavel into a fundraising magic wand: If your business is affected by tax law, and you want to change the tax code, or ward off an undesirable change, you probably need to support Rangel’s campaigns, which, in effect, means paying for his legal defense.
One illustrative episode in Rangel’s orbit is the story of the Fire Sprinkler Incentive Act, which Rangel’s committee will probably advance this year. This tale shows how the contribution-to-legislation nexus on Capitol Hill can often be more about lawmakers exploiting businesses rather than businesses softening up lawmakers.
In the first three months of 2009, Rangel raised $279,959, with 59 percent of that coming from political action committees. Only one PAC contributed the maximum $10,000: The National Fire Sprinkler Association, which cut $5,000 checks Jan. 7 and Jan. 9.
A week later, NFSA President John Viniello told his Illinois and Wisconsin chapters that Rangel “will be supportive” of the Fire Sprinkler Incentive Act, according to the NFSA’s newsletter.
Two weeks after that, on Feb. 1, the NFSA held a fundraiser for Rangel — a $700-a-head breakfast in New York City, attended by a dozen executives and owners of fire sprinkler companies. “He’s crucial to the bill,” NFSA spokesman Jim Dalton explained to me in discussing the fundraiser.
But the Fire Sprinkler Incentive Act is no boondoggle for the industry. It’s a fairly modest tinker to tax law. Currently, if a building owner–residential or commercial — installs automated fire sprinklers, he cannot claim the entire cost as a tax deduction that same year, but he has to spread that deduction over about 30 years, taking a deduction on the annual “depreciation” of the sprinkler system rather than the actual cost. Many long-term capital investments are treated the same way.
NFSA wants to speed that depreciation up to five years, thus increasing the tax savings for sprinkler buyers, and thus spurring their purchase. The makers and installers of fire sprinklers — NFSA’s members — clearly benefit. Landlords and developers benefit. Public safety benefits if more buildings have these sprinklers. The loser is the federal Treasury, because revenue would decrease in the short term.
The Fire Sprinkler Incentive Act was first introduced in April 2003, following a deadly fire at a nightclub in Rhode Island. The bill was referred to Ways and Means, then under Republican control, which held a hearing, but never moved it.
In the next Congress, the bill also died in committee. In 2007, Democrats took control of the House and Rangel took control of the committee. When Rep. Jim Langevin, D-R.I., proposed the bill, it was referred to Rangel’s committee, where it never even got a hearing.
But this year, NFSA cut those two $5,000 checks and got a word of support from Rangel. Then on Feb. 1, there was the apparent fire-sprinkler fundraiser for Rangel. This obscure industry has contributed nearly $20,000 to Rangel’s campaigns.
But contributing to Rangel’s campaigns is, in effect, contributing to his legal defense. Of the $724,000 his campaign spent in this year’s first quarter, more than $450,000 of it has been for legal fees.
These fees cover Rangel in his tax case — he apparently didn’t pay taxes on a beachside resort villa he owns in Punta Cana, Dominican Republic — and other legal and ethical minefields in which he finds himself.
The climate change legislation and health care reform soon to come before his committee will have an impact on the energy, biotech, telecom and insurance industries. It’s worth watching how these bills affect Rangel’s campaign coffers and legal defense efforts.
Timothy P. Carney is The Washington Examiner’s Lobbying Editor, His K Street column appears on Wednesdays.
