Ways and Means Chair Rangel is staking out a number of tax positions for the late fall tax wrangle.
1. On tax simplification, Rangel says he is considering ways to lower corporate tax rates in order to help US corporations compete globally. There are two major problems with this proposal:
(i) half of US publicly traded corporations pay no federal income tax already, so lowering the corporate tax shifts the federal tax burden from corporate taxpayers who pay little to the corporate fisc to individuals; and
(ii) the mantra about lowering US taxes to help corporations compete globally seems to be continuing to gain credibility even though the competition may be with other US corporations (so lowering the US tax burden has nothing to do with increasing US corporations' ability to compete globally) and even though US corporations' effective taxes are alreaady at the bottom of the tax burden for OECD countries.
2. on home mortgage loan relief, Rangel indicated that Democrats had decided for permanent relief from cancellation of debt income in connection with home mortgages. Again, it is not clear why this bill is marching so fast to passage. Taxpayers who are in financial straits already have relief available through the bankruptcy and insolvency exceptions. Taxpayers who flip houses and take on too much risk don't merit a bailout by the rest of the taxpayers, nor do those with substantial assets who overbought luxury properties but can afford the tax obligation. The real estate industry and financial institutions must be lobbying fast and furious on this one.
3. on carried interest, the lobbying by the hedge and equity fund industry hasn't yet gotten Rangel to back away from taxing managers' "carried interest" received for services as compensation income subject to tax at ordinary income rates. He says he will "listen" but doesn't yet see any justification for the disparity between hedge fund managers' compensation income and others who provide services for a wage.
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