Out of the many pieces that I've read on Congressman Charlie Rangel's "Mother of All Tax Reforms", I have to say that Bloomberg.com columnist Kevin Hassett knocks it out of the park in his most recent column when he notes that this bill is a blinking, bright red warning of what is ahead if Hillary Clinton assumes the White House in 2009. Here's a look at Hassett's informative column:
In terms of revenue, Rangel's reform would be the biggest tax increase in history. Compared to a baseline where President George W. Bush's tax cuts are extended and the dreaded alternative minimum tax isn't allowed to swallow millions of taxpayers whole, the bill raises taxes by a whopping $3.5 trillion over the next 10 years, according to the office of Representative Jim McCrery of Louisiana, the top Republican on the Ways and Means Committee.
To put that in perspective, that's about $2 trillion more than the 10-year cost of the Bush tax cuts enacted back in 2001.
But the revenue grab isn't the scariest part. That honor belongs to the increase in marginal tax rates, which is almost unfathomable in its scale. Rangel's main objective is to repeal the alternative minimum tax, which was originally designed to capture taxes from wealthy individuals but over the years has taken in more and more middle-income families.
48% Tax Rate
To accomplish that, and still collect the AMT revenue, he would enact a surtax on the adjusted gross incomes of wealthy taxpayers. If your family's income is above $200,000, then your surtax is 4 percent. If it's above $500,000, it's 4.6 percent.
But the tax increase on the wealthy doesn't stop there. When the Bush tax cuts expire in 2010, the top marginal rate goes back to 39.6 percent. In addition, Rangel would restore the phase-out of itemized deductions and personal exemptions that was repealed in Bush's 2001 bill.
Adding it all up, and adjusting for the tax rate on Medicare, the Rangel bill would raise the federal marginal tax rate on incomes above $500,000 to close to 48 percent.
To put that tax rate in perspective, after adjusting for state and local income taxes, it would be about 13 percentage points higher than the average of U.S. trading partners in the Organization for Economic Cooperation and Development. And it would give the U.S. the fourth-highest combined top marginal tax rate in the OECD, behind only Denmark, Sweden and France.
I for one know that this nation will become a sclerotic entity like the German, Spanish, Italians and others if we continue to soak the "rich" by placing greater and greater taxes on them. If folks like Rep. Rangel think that the AMT is bad and the economy is bad, then he should see how many small businesses shutter their windows, folks lose their jobs, and others venture out of America to more tax friendly environments once this massive tax is imposed. When nations like France start saying that their taxes are too high and push for lower taxes, one scratches their head at why Congressmen Rangel and others would propose such crippling taxes.