Rangel, having finally achieved his coveted chairman’s role after years of waiting, wants to make history. His staff is hard at work on an audacious plan that over the next decade would redistribute up to a trillion dollars in American income through the tax system. Even if this package got through the House, it probably would be filibustered to death in the Senate, with a veto by President George W. Bush a last resort. But Rangel may really be aiming at 2009, envisioning a Democratic president and a filibuster-proof Democratic majority in the Senate… Rangel talked about closing “loopholes,” but the real money would come from drastically increasing the number of Americans paying the top income tax rate, 36 percent, and applying that rate to those who currently pay only capital gains taxes. Rangel also is considering the old millionaires’ tax, but he would apply it to much more than millionaires: a surtax on household incomes over $200,000. All this would reverse the tide of across-the-board tax reduction begun by John F. Kennedy and Lyndon B. Johnson and renewed by Ronald Reagan. While Rangel appears to be preparing for big-time tax increases in 2009, he is giving it a try in 2007. Something surely will be done to blunt the AMT this year, but Rangel is holding it hostage, with the ransom to be paid through left-wing tax revision. Even if this tactic will not enable passage of the mother of all reforms, it could force passage of more limited redistribution this autumn.
This effort by Rangel will help ensure that taxes will again be a major issue in the 2008 presidential election. Congressional Democrats earlier this year adopted a budget resolution calling for a tax increase of nearly $400 billion. That resolution overlaps somewhat with Rangel’s bill, in that they both assume an end to some or all of the Bush tax cuts. But Rangel must go much further to pay for all of the Democrats’ priorities. And if Rangel is setting the stage for a serious effort to raise taxes in 2009, he is again firmly identifying the Democratic party as being on the side of raising taxes by hundreds of billions of dollars. The Democratic presidential nominee will find it hard to distance himself or herself from Rangel’s plans, since to oppose the tax increase would force opposition to all the programs it is intended to fund. Republicans should be appreciative that Rangel is choosing to open the debate over dramatic tax increases now, long before the presidential election, at a time when the budget deficit is shrinking quickly. It is a courageous act.
