Rangel looking to trim ‘fat’ from tax code

Rep. Charles Rangel (D-N.Y.), chairman of the House Ways and Means Committee, seemed determined yesterday to stick to pay-go, even if it means coming up with hard-to-find offsets to reform or patch the Alternative Minimum Tax (AMT) this year.

Rangel suggested that scrubbing the tax code of its many tax breaks and incentives would be the best way to pay for the costly fix under the Democrats’ pay-as-you-go budget rules, which require that every tax cut or spending increase be deficit-neutral.

“You’ve got a lot of fat in there — scratch that — incentives in there. You have to look at the incentives,” he told an audience at a seminar on tax and budget issues sponsored by Baker Hostetler, Clark Consulting and the Yale Club of Washington.

The AMT was designed to ensure that the wealthy paid enough in taxes, but it will engulf tens of millions of taxpayers in the next several years. Repealing that tax, however, would reduce revenue flowing to the Treasury by at least $800 billion over the next decade, according to the Tax Policy Center. Just patching it this year will cost $50 billion in lost revenue, estimates the Joint Committee on Taxation.

Rangel did not call for the elimination of any particular tax break. But he singled out the popular mortgage interest deduction for homeowners and the special tax status conferred on non-profits as items that ought to be on the table.
He also suggested that the government make tax rates for individuals “more equitable,” saying that “at the very minimum, we have to set the tone that these things have to be discussed.”

With his trademark humor, Rangel referred to the painful process of cleansing the tax code as “tax simplification.” In practice, it would probably deal a blow to many groups enjoying special tax treatment but likely cut down on the hours taxpayers spend calculating their tax bills.

Speaking after Rangel, Ways and Means Health subcommittee Chairman Pete Stark (D-Calif.) told the crowd that an expansion of the State Children’s Health Insurance Program (SCHIP) would have to be partially funded by the physicians, hospitals, nursing homes and other healthcare providers that receive payments under Medicare.

“We will be called upon to raise the money from other providers … to fund the program,” he said.

Stark said that “to do it right,” the 10-year SCHIP reauthorization would cost $50 billion. That is far more than the $5 billion in extra funding over five years that President Bush set aside for the program in his 2008 budget.

Health insurance companies that offer coverage under Medicare Advantage would not be spared cuts in Medicare payments, Stark insisted.

“One of the problems is that they’re being overpaid … It seems to me that they’re going to have to come to the table,” he said.

Other immediate Democratic priorities include legislation to bar employers from gathering genetic information about their employees as well as a law requiring that health insurance plans provide the same coverage for mental-health hospitalizations as for other hospitalizations.

Rep. Tom Reynolds (R-N.Y.) criticized Democrats’ interest in cracking down on tax cheats, saying, “I don’t see a huge opportunity to bring in tax dollars there.”

Rep. Tom Cole (R-Okla.) urged the audience to “watch the Iraq supplemental debate play out,” predicting that the same problems will occur in this year’s budget debates. 

“I think Democrats are going to have an enormous conflict on the Hill,” he said.

But Rangel and Stark emphasized that they would work with their Republican colleagues to come up with legislation backed by both parties.

“We will be forced to be bipartisan, and I don’t see anything wrong with it,” Stark said, admitting that Democrats had neither the cohesion nor the discipline to go it alone.

Rangel repeated his intention to work with the Bush administration on reforms supported by both Republicans and Democrats. Yet he stressed his displeasure with administration trade policy, which he claimed reflected entirely the views of the Republican Party and favored big corporations at the expense of workers.

“The whole idea that we have to get across to the administration is that this is not going to be a Republican trade policy we buy into. It’s going to be an American trade policy,” he said.

And he delivered a warning to U.S. Trade Representative Susan Schwab that Congress will play a bigger role in crafting policy.

“We’re going to tell the USTR that she speaks for the U.S. Congress through the Ways and Means Committee,” he said.