Rangel Proposes Largest Tax Increase in American History
3:14 PM, Oct 25, 2007 • By BRIAN FAUGHNAN
According to the Congressional Budget Office, the United States government faces a budget deficit of $343 billion from 2008-2017. With total spending over that time near $36 trillion, the projected deficit is essentially a rounding error--one that could easily be closed by trimming projected spending growth by a fraction of a percent. How do Democrats propose to close it, though?
With the largest tax increase in American history.
Chairman Rangel is touting the benefits of the plan, but Jim McCrery--the senior Republican on the House Ways and Means Committee--explains that the tax increases called for under the Rangel plan total $3.5 trillion over the next ten years.
The frustrating aspect of the Democratic plan is that it purports to raise taxes to make up for revenues lost to tax cuts. But the federal government never intended to collect these revenues in the first place. The AMT was intended to ensure that a few hundred of the wealthiest Americans did not escape taxation entirely. The Democratic argument is that by correcting the error that would have caused the AMT to unintentionally touch millions of taxpayers, they are giving those taxpayers a tax cut.
Think of this analogy: suppose Democrats in Congress announced that they were going to raise the taxes of middle-income workers by a trillion, but then repealed the increase before it took effect. Would you count yourself the beneficiary of a tax cut? Under Rangel's plan, that's exactly what you are.
Take it a step further though. Suppose that in order to cancel the planned tax increase, Democrats announced that they needed to 'make up the lost revenue' elsewhere. That's what House Democrats are proposing here.
The House Republican Study Committee has set out an alternative to the Rangel plan, which doesn't use the AMT as an opportunity to raise taxes. They explain it here.
Also note that while Rangel is claiming that his plan offers a tax reduction for many businesses, it took the National Association of Manufacturers only a few hours of review to grow suspicious: