Rangel Departure Highlights Undone Tax Agenda

Charles Rangel – chairman of the tax-writing House Ways and Means Committee – stepped down yesterday after eight months of ongoing investigations. While numerous other House of Representative members had urged his resignation due to ethics complaints, ironically including unpaid taxes, while others feel his resignation came at the wrong time.

There are dozens of items on the tax agenda, and many economists are worried that Rangel’s replacement (Sander Levin) may not be familiar with them. Earlier today, the Associated Press put together the following list of unfinished tax business that Rangel is leaving behind for Levin to handle:

• The top two marginal tax rates would increase, with the top rate going from 35 percent to 39.6 percent. The increase would affect individuals making more than $171,850 and couples making more than $209,250. President Barack Obama has asked Congress to limit the tax increases to individuals making more than $200,000 and couples with incomes more than $250,000.

• Tax rates also rise for just about every other income level. The lowest tax rate would rise from 10 percent to 15 percent. This year that 10 percent rate applies to taxable income under $8,375 for individuals and under $16,750 for couples.

• The child tax credit would be reduced from $1,000 to $500.

• The top tax rate of 15 percent on dividends would expire, leaving dividends to be taxed as regular income, with a top rate of 39.6 percent.

• The top capital gains tax rate of 15 percent would increase to 20 percent.

• The federal inheritance tax, which has been gradually phased out over the past several years, will return with a 55 percent tax on estates above $1 million.

Ethics Panel Expands Rangel Investigation

From the Associated Press:

The House ethics committee is expanding an investigation of Rep. Charles Rangel, chairman of the tax-writing Ways and Means Committee. The ethics panel issued a statement Tuesday saying it had voted to expand an already far-ranging probe into the New York Democrat to examine whether he protected an oil drilling company from a big tax bill when the head of that company pledged a $1 million donation to a college center named after the congressman.

The move means the Rangel inquiry will likely stretch well past early January, when House Speaker Nancy Pelosi, D-Calif., had previously said she expected the matter to be resolved.

Republicans have called for Rangel to step down from his chairmanship of the powerful Ways and Means panel during the investigation. The expanding investigation means the ethics cloud hanging over Rangel is likely to follow him and Democratic leaders into the next Congress as they seek to pass major stimulus legislation and buoy the sinking economy.

The committee will now investigate contributions or pledges of money made to the Charles B. Rangel Center for Public Service at the City College of New York, particularly one made by Eugene M. Isenberg, CEO of Nabors Industries, Ltd.

Rangel, 78, reportedly helped preserve a tax loophole that saved the company tens of millions of dollars a year.

The congressman, who has been in office for 40 years, maintains he has done nothing improper, and he says he has always opposed the kind of change to tax law that would have cost Nabors dearly.

The ethics committee said it was expanding the probe after Rangel asked them to do so.

The committee has already been probing Rangel's failure to pay taxes on about $75,000 in rental income from a beach house he owns in the Dominican Republic. They are also eyeing his use of three rent-stabilized apartments in Harlem, including one for a campaign office. Also under scrutiny are letters Rangel wrote on congressional stationery looking to drum up donors for the college center.

College officials have refused to say who donated to the Rangel center, citing the ongoing investigation.

Rangel has insisted that whatever he did wrong, they were honest mistakes, not intentional deceptions.

Ditch Charlie

From NY Post.com:

Are congressional Democrats truly committed to dealing with the economic and fiscal policy challenges they face next year?

The answer will be seen in how they address their increasingly problematic Charlie Rangel situation.

Scarcely a day goes by without yet another ethical impropriety coming to light regarding the chairman of the House Ways & Means Committee.

Last Wednesday, the DC-based National Legal and Policy Center urged the House Ethics Committee to expand its ongoing Rangel probe to include the recent revelation that he took a "homestead" tax deduction meant for year-round DC residents - though he legally resides in New York.

Tuesday, The New York Times delved into the relationship between Rangel and oil-drilling businessman Eugene Isenberg - who made a $1 million pledge toward building Rangel's school for public service at City College of New York. Rangel later preserved a controversial offshore tax loophole that saved Isenberg's company, Nabors, millions.

Rangel's previous ethical woes, though troubling, were largely personal: not paying taxes on property in the Caribbean; using one of four rent-stabilized apartments as a campaign office; improperly storing a car in a House parking garage.

The Isenberg-Nabors deal is, potentially, far more serious: It reeks of a quid pro quo between Rangel's official duties and fund-raising for his personal project.

The Times reported that Rangel held meetings the same day, at the same hotel, with Isenberg to discuss the CCNY project and then with Nabors' chief lobbyist on the tax loophole.

Despite Charlie Rangel's Tax Problems, He Might Help Republicans Keep Bush's Tax Cuts

From US News.com:

It's looking like House Ways and Means Chairman Charles Rangel is going to face an ethics committee investigation for, among other things, failing to report income on rental properties and supporting a tax law change favoring a big donor to an institute named after Rangel. I'm sorry to see this. I like Charlie Rangel, I think he's a decent person and a charming pol, and I'm inclined to cut him some slack because he served in the Korean War and survived some of the most horrific fighting that American men in arms have ever faced. I think it would be sad to see him lose the chairmanship of Ways and Means for sins which are more venial than mortal, just as I thought it was sad that his predecessor as chairman, Dan Rostenkowski, lost not only his chairmanship but also his seat in Congress and, for a while, his freedom for some small bits of chicanery that were dwarfed by his public policy achievements, notably in the enactment of the tax reform bill of 1986.

The more so, because I think that the tax bill Rangel brought forward in the outgoing Congress showed he was open to major changes in tax law along the lines of the 1986 bill—a lowering of rates combined with a reduction in tax preferences that have accumulated, like barnacles on the ship of state, over the intervening two decades. Rangel's bill would have cut the corporate tax rate, which is far higher than in almost any other advanced country, at least a little bit, and was intended to get rid of the Alternative Minimum Tax which, because it's not indexed to inflation, threatens to cover hugely larger percentages of taxpayers every year. Taxpayers, as I have noted several times, who are concentrated in high-nominal-income, high-state-and-local-tax, heavily Democratic states like Massachusetts, Connecticut, New York, New Jersey, Maryland, and California.

The obvious deal goes something like this. Democrats get repeal of the AMT and perhaps some increase in refundable tax credits (the latter being part of Barack Obama's tax platform). Republicans get a retention of the Bush tax cut rates on higher earners and lower corporate rates. All this is "paid for" by eliminating tax preferences. It is something that is feasible only if done on a bipartisan basis, which is possible here because Democrats do not look likely to have the 60 votes to cut off a filibuster on a major tax bill in the Senate and because there is an ongoing practice of bipartisan deals between Senate Finance Chairman Max Baucus and ranking minority member Charles Grassley. Rangel's bill is an indication that he is interested in acting on a bipartisan basis in the House and would not (as his predecessor Bill Thomas did on the 2003 Medicare prescription drug bill) exclude the minority party (in that case Charlie Rangel himself) from participation in drawing up the legislation.

Another Tax Issue Surfaces for Rangel

From NY Times.com:

Representative Charles B. Rangel’s legal team is reviewing his tax records to determine whether the congressman received a homestead exemption on a house he owned in Washington while living in several rent-stabilized apartments in New York City.

The situation is potentially troublesome for Mr. Rangel, a Harlem Democrat who is already the subject of a wide-ranging internal House investigation stemming from an assortment of ethical concerns.

Rent laws in New York City and the state require that tenants occupying rent-stabilized apartments use those units as their primary residences. At the same time, the District of Columbia’s Office of Tax and Revenue extends the homestead tax deduction only to properties that are primary residences.

The internal review by Mr. Rangel’s legal team was prompted by a report in Sunday’s edition of The New York Post quoting a District of Columbia tax official as saying that Mr. Rangel received a homestead tax exemption for a four-bedroom home he owned in Washington. The official told the newspaper that the congressman received the tax exemptions from 1995 through 2000, when he also had the use of rent-stabilized apartments in his district in Harlem.

In a statement released on Sunday night, Emile Milne, a Rangel spokesman, said: “The New York Post has raised a question about the tax treatment of a property the Rangels once owned. The property was sold more than eight years ago and we have asked Congressman Rangel’s accountant to retrieve the records about it.”

Charles Rangel Uses Campaign Funds for Legal Muscle in Tax Mess

From the Boston Herald:

A newspaper says New York Rep. Charles Rangel paid more than $100,000 in campaign funds to a law firm to represent him as he continues to face ethical questions over his tax records.

The New York Post reported Sunday that the powerful chairman of the tax-writing House Ways and Means Committee had hired the law firm though his Rangel for Congress fund.

Federal election rules prohibit elected officials from using campaign funds for personal legal expenses.

Rangel spokesman George Dalley said the congressman had a "prior ruling" from the Federal Election Commission that "this is a legitimate campaign expense."

But the chairman of an ethics-watchdog group was skeptical. National Legal and Policy Center chairman Ken Boehm said the questions Rangel faces over his taxes appear to be personal in nature.