Rangel and tax increases

If Democrats gain 15 seats in the House in the midterm congressional elections, New York Rep. Charlie Rangel will become chairman of the House Ways and Means Committee, making him the principal gatekeeper for tax legislation in Congress.

In various interviews recently, Mr. Rangel has sent different messages. On Sept. 20, he told Bloomberg News that he “cannot think of one” of the tax cuts passed under President George W. Bush that merits renewal. Nearly all of those cuts expire at the end of 2010. When asked whether as chairman he would consider tax increases across the table, Mr. Rangel replied, “No question about it,” according to the Sept. 26 edition of CongressDaily PM. But on the same day, Mr. Rangel told Fox News Channel’s Neil Cavuto that “a retroactive increase in taxes” was “definitely not on the table,” adding that he “would not roll back” any tax cuts that have been legislated to remain in effect through 2010. To clarify things, the Democratic staff of the Ways and Means Committee pointed to Mr. Rangel’s interview with MarketWatch. Citing Mr. Rangel, MarketWatch reported on Tuesday that “a Democratic-controlled Ways and Means Committee wouldn’t attempt to pull the plug on any of the first-term Bush tax cuts before they expire in 2010.”

Mr. Rangel, of course, voted against the 2001 and 2003 tax cuts; he voted against the 2006 measure that extended the 2003 cuts from the end of 2008 to the end of 2010; and he has vociferously opposed making the 2001 and 2003 cuts permanent. Nevertheless, his repeated pledge not to pursue any “roll back” through 2010 is noteworthy.

To be sure, even if a “rollback” effort were undertaken during the next Congress (2007-2008), it is safe to say that it would never achieve the two-thirds majority in both chambers that would be necessary to override the inevitable veto from Mr. Bush. In the absence of Mr. Rangel’s commitment not to pursue rollbacks, it is easy to imagine a scenario in which Democrats could muster majorities in both chambers in 2009 to ram through a reconciliation bill replete with rollbacks (reconciliation measures are not subject to filibuster in the Senate) that would be gladly signed by, say, President Hillary Clinton, who joined Mr. Rangel in voting against the 2001 and 2003 tax cuts.

Thus, Mr. Rangel’s promise of “no rollbacks” means the top individual income-tax rate would remain 35 percent through 2010. President Clinton and a Democratic Congress raised the top rate from 31 percent to 39.6 percent in 1993 after President George H.W. Bush had increased it from 28 percent to 31 percent in 1990. Enacted in 1997, the $500 child tax credit was increased to $1,000 in the 2001 and 2003 tax bills, and will remain in effect. As high as 70 percent as recently as 1980, the top tax rate for dividend income was lowered in 2003 from 38.6 percent to 15 percent, where it would remain through the end of this decade. The top tax rate on capital gains, which had been reduced from 28 percent to 20 percent in 1997 and then to 15 percent in 2003, will remain at that level through 2010. Marriage-penalty relief, the 10 percent income-tax bracket and reduced marginal rates for middle-income workers will also stay in effect for the next four years if Mr. Rangel chairs Ways and Means, regardless of who is elected president in 2008.