On taxes, Democrat Rangel’s a bit of a Reaganite

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Thursday, Jan. 3, 2008 | midnight

“I was in South Carolina recently and a (black) guy brought me his grandson and said he was so excited to have the kid shake the hand of the chairman of the powerful Ways and Means Committee. And the kid grabbed my hand and asked, ‘What was the Ways and Means Committee?' And the grandfather said, ‘I don't know but it's awesome.'”

-- Charles Rangel, quoted in National Journal

Washington

On the eve of the Democrats' capture of the House in the 2006 elections, Rangel, the Harlem congressman, was asked if he would want to be addressed as Mr. Chairman. He replied, “I don't want to be treated any differently than any other world leader.” He has a sense of humor as well as a sense of his place at the epicenter of the debate that will rage as the Bush tax cuts approach expiration in 2010.

At 22, Rangel was a high school dropout pushing a hand truck in Manhattan's garment district, but he also was a war hero -- the “since” in the title of his memoir, “And I Haven't Had a Bad Day Since,” means since Korea. By 30, he was a high school, college and law school graduate.

At 77, the ebullient legislator has opened the tax debate with a proposal that suggests something startling: Regarding two matters, Rangel is a Reaganite. Ronald Reagan opposed using the tax code “as a means of achieving changes in our social structure.” Rangel -- in his 19th term, a man of House proprieties -- says, “I don't think the tax code should be a substitute for the appropriations process in making social change.”

Social policy should be, he thinks, the province of “the standing committees.” The question for tax writers “is not just what is fair and equitable but what is good for the economy.”

Furthermore, Rangel proposes reducing the corporate tax rate from 35 percent to 30.5 percent, a rate that still would be higher than the average corporate rate among major industrialized countries. Rangel would entertain arguments for an even lower rate if compensatory revenue could be found.

The rate actually should be zero, for three reasons: Corporate taxation discourages investment by reducing the return on capital; it is a hidden tax passed along to corporations' customers; it is double taxation because corporate earnings are taxed again as dividends. Still, it is heartening that the Democratic chairman of the tax writing committee favors reducing corporate America's tax burden.

It also is heartening that Rangel bothers to define (sort of) a word that many Democrats, who rarely define it, treat as a four-letter word: “rich.” At what level of income are people rich? It “certainly isn't $200,000,” says Rangel, who insists that under his plan “very few people making under $500,000” would not get a tax cut.

Perhaps this is the compassionate liberalism of a Democratic Party that represents the rich: The conservative Heritage Foundation reports that Democrats hold a majority of the wealthiest congressional districts, and that half the richest households (single filers earning at least $100,000 and married filers earning at least $200,000) live in states where both senators are Democrats.

Rangel says his proposal is “revenue neutral” and would only “rearrange” taxes. Much depends on how the alternative minimum tax and the Bush tax cuts are dealt with permanently. In any case, there will be a load of compromising on the road to Rangel's horizon.

“It's embarrassing,” Rangel says, “what we do to taxpayers” -- embarrassing that so many of them cannot perform their civic duty of paying taxes without hiring a professional preparer. And sometimes, Rangel says, “they owe more to the preparer than they do to the government.”

“I would erase the whole thing,” he says, and begin anew by simply asking, “How much money does it take to run the damn government?” Then he would sweetly invite all the interest groups “to come in and defend their preferences.” He thinks “a lot of people would have forgotten” why the preferences were granted, so the code might be partially cleaned up “by default.”

More of a Madisonian than a McCainiac, Rangel says, “I really think lobbying is a good goddamn thing.” He surely knows, however, that tax reform can also be political reform. Reform should do what was done in 1986 -- simplify, paying for lower rates by closing loopholes.

Serious simplification would, in effect, confiscate much of the intellectual capital of those lobbyists -- they are legion -- who live high on the hog by entreating Congress to tweak the tax code for the benefit of clients. Such confiscation would be awesome.

George Will is a columnist for The Washington Post.