Next week, House Ways and Means Committee Chairman Charles Rangel, a New York Democrat, will unveil his plan to overhaul the U.S. tax code, with likely measures including repealing the alternative minimum tax, cutting corporate taxes (though also eliminating some tax breaks), and raising taxes on wealthier Americans and, specifically, hedge fund managers. He will also introduce a bill to temporarily patch the AMT so it doesn't snag millions of new middle-class taxpayers next year. A longtime Capitol Hill observer tells me that finding the $65 billion to pay for the one-year fix will probably mean that Dems will abandon their pay-as-you-go rule, which requires tax cuts to be paid for through spending cuts or higher taxes elsewhere. Another Congress watcher puts it this way in E-mail to me:
This Rangel situation is a mess. He needs to find $65 billion for this year's patch which is no small task—a major tax increase on some group/industry is needed. On the larger bill, he was creative to include the corporate tax reduction with the idea of "closing loopholes." But he is not doing this for efficiency or simplicity purposes—he is doing it to raise revenue. So you may have a 1 percent drop in the rate, $4 billion per year, but have $20 billion per year in corporate tax increases. (These are random numbers for illustrative purposes.) In my view he is pushing hard to do this so the Dems don't need to raise taxes upon entering office with full control in '09.
Policy analyst Ann Mathias of the Stanford Group, an institutional research firm, sees things this way: "[Rangel] undoubtedly knows such a measure would be vetoed this fall by President Bush; by year-end a clean bill will pass, waiving the pay-as-you-go provisions [for a temporary AMT fix]. ... [But the bigger bill] is a preview of what will come as Congress considers the Great Tax Hike of 2009."