Few domestic issues have the potential to unite or divide our nation like tax policy. This is regrettable because taxes are the price we pay for civilized society and for our national security. We should not send the bill to our children. Our volunteer tax system depends on the public believing that every individual pays his or her fair share or we will not continue to have the high level of voluntary compliance that we rely on to collect our taxes. Unfortunately, recent changes to our tax laws and the failure to move forward on comprehensive reform have resulted in a tax code that is complicated, outdated and skewed in its benefits to the wealthy.
When politicians and academics discuss the upcoming tax agenda, many jump immediately to the year 2010 and the expiration of the Bush tax cuts. I don’t have the luxury of talking about 2010. At my age, I don’t even buy green bananas. Instead, I want to focus on what we can do now to clean up the code and help the millions of working families struggling to keep up with the rising cost of living and increased economic insecurity.
Nowhere is the need for immediate action more evident than in the looming threat of the alternative minimum tax, which will hit 23 million additional middle-class taxpayers this year if Congress does not act. While the AMT was established to ensure that the wealthiest families did not game the tax code to avoid paying taxes altogether, it has grown to become a monster. Because the AMT has been dealt with in piecemeal fashion through yearly “patches” with high annual costs, it now threatens to hit millions of taxpayers it was never intended to reach.
The growing reach of the AMT is by no means a new problem. In fact, many individuals warned the Bush administration that their 2001 and 2003 tax cuts would force millions of Americans to pay the AMT. I wrote President Bush a letter in 2001 cautioning that millions of Americans would not receive the benefits promised in his tax cut because of the AMT. These warnings went unanswered.
Early in this new Congress, the Ways and Means Committee identified the elimination of the AMT as a goal and pledged to work toward a bipartisan solution. We held a series of hearings specifically on the AMT, examining its history, scope and the threat it poses to millions of working families.
The Bush administration had a choice in 2001, ultimately deciding on tax breaks that predominantly favor the wealthy. In fact, those tax breaks were largely funded by AMT revenue. The Ways and Means Committee stands ready to act on eliminating the AMT, providing overdue tax relief to these working families. We are examining the tax code for ways to simplify our laws to promote economic growth, increase prosperity for working families, and provide equity and fairness.
Economically, the trillions of dollars in cost associated with the Bush tax cuts has placed our nation on a perilous fiscal course with record deficits and skyrocketing debt. Even the Bush administration cautions that a permanent extension of the 2001 and 2003 tax cuts would have a negative impact on economic growth unless accompanied by a corresponding decrease in federal spending or increase in tax revenue. Recent Republican Congresses could not muster the political strength to vote for permanent extension of these cuts, and any decision regarding their extension in 2010 must be based on the economic, fiscal and political environment at that time.
Domestically, however, there is ample evidence to illustrate how the 2001 and 2003 Bush tax cuts have actually widened the gap between rich individuals and the rest of America. During a recent Ways and Means hearing on equity in our tax code, Jason Furman, director of the Hamilton Project at the Brookings Institution, shared his view that “by themselves these tax cuts have exacerbated after-tax income disparities, thus resulting in more inequality.” Couple that with the steady decline in wage growth, the loss of millions of manufacturing jobs and the rising cost of health care and education, and there is no question that the American middle class is caught in a squeeze.
A recent Wall Street Journal/NBC poll demonstrated that two-thirds of Americans believe the economy either is in recession or will be shortly. In fact, the same WSJ poll indicated that the American people strongly believe the Democrats will do a better job of reducing the record deficits of the Bush administration, controlling government spending, dealing with the economy and most importantly — dealing with taxes.
As Congress moves our domestic policies in a new direction, we must prioritize our goals to provide tax relief to those who have been squeezed or left behind in recent years. In order to do so, the Ways and Means Committee has a responsibility to look at the whole code for ways to improve the benefits provided. In addition to eliminating the AMT, we are looking to improve benefits such as the earned income tax credit, standard deduction and child credit so that taxpayers can focus on ensuring their children have access to health care, education and a stable foundation from which to build and reach their American dreams.
The simple truth is, the status quo is not working for an overwhelming majority of Americans. I am confident that, at the end of the day, the package we produce will bring fair and equitable relief to 90 million tax payers while promoting economic growth and eliminating loopholes in our tax laws.
The American people are tired of the status quo and working families will not be ignored any longer. Democrats have promised to restore equity and fairness to our tax code beginning with tax relief for middle-class families who represent the backbone of our economy. We will provide this tax relief as part of a domestic agenda to address the growing concerns over health care, education and competitiveness in the global marketplace. By taking this approach, we will begin to restore economic security and prosperity to millions who have been left behind.
Rep. Charlie Rangel (D-N.Y.) is chairman of the Ways and Means Committee.