With the growing housing crisis, credit crunch and falling value of the U.S. dollar, working families are finding it harder to get by. As Congress looks toward 2008, the American people expect us to focus on issues of economic and national security. It is in this context that I recently introduced the Tax Reduction and Reform Act, which would provide tax relief to more than 90 million working families while helping to ensure that American companies remain competitive internationally.
While some have suggested that my bill is a blueprint for 2009, I disagree. The need for tax reform is immediate. This bill is a road map for the 110th Congress and an opportunity for the current administration to overcome partisan politics and strengthen our economy.
The Tax Reduction and Reform Act simplifies the tax code by eliminating the alternative minimum tax and other outdated provisions while restructuring existing benefits to promote equity and fairness. The AMT has grown to be a dangerous burden on millions of taxpayers it was never intended to hit. After kicking the AMT can down the road for years, the time has come to eliminate the tax once and for all. If you look at the cost of repeal — roughly $800 billion over 10 years — it is clear that the best way to achieve this goal is in the context of comprehensive tax reform.
The Bush administration and Republicans on the Ways and Means Committee share this view; however, the devil is always in the details. My plan is not locked in concrete, but it is the only plan in discussion and I would hope those who have criticized it would contribute their ideas so that we can enact bipartisan reform of our tax laws.
While eliminating the AMT would provide significant tax relief to middle-class families, doing so in the context of tax reform allows us to strengthen economic security for millions more.
Republicans often argue that taxpayers know how to spend their money better than the government — I agree. However, I simply do not believe you have to be a millionaire to know how to spend your money and spur the local economy. A few extra dollars each month can mean the difference between debt and savings to families living at or below the poverty line.
My legislation would increase the standard deduction, enhance the earned income tax credit and provide a benefit to more than 12 million children and their families by expanding the refundable child tax credit. These are important investments in our communities and our future that will pay dividends in the long run, allowing workers and their children to face each day with nourishment and good health to pursue an education and job training to contribute to our economy.
Along with a highly skilled work force, we must ensure that our tax code advances to allow American companies to compete and win in a global economy. That is why my tax reform proposal calls for a significant reduction in the corporate tax rate to 30.5 percent from the current level of 35 percent. Again, there is strong, bipartisan support for lowering the corporate rate. I have spoken with Treasury Secretary Hank Paulson on this issue and incorporated in my proposal a number of his thoughts on lowering the rate and closing existing loopholes or deductions in the code. Personally, I believe there is very little light between the secretary and me on the issue of corporate tax reform.
If the administration and Congressional Republicans are serious about reforming the corporate tax system, they should join me and release proposals to move the discussion forward. Together, we can seize this great opportunity to strengthen our economy.
Tax reform cannot take place in a vacuum that ignores the economic outlook, especially with respect to the deficits and debt that have forced us to borrow trillions of dollars from foreign countries. This debt poses a grave threat to our economic and national security. To cure this, we must pursue tax reform that is revenue neutral. You need not take my word for it; just listen to former Federal Reserve Chairman Alan Greenspan, who criticized the 2001 and 2003 Bush tax cuts for adding trillions to the national debt, thereby doing more harm than good to our economy. The budget surplus established under the Clinton administration has long since been squandered on tax cuts for the rich, the war in Iraq and a growth in government spending that surprised many conservatives. It is not too late for this administration to turn over a new leaf and begin to act responsibly.
Tax reform means winners and losers. My bill provides a net tax cut to those making less than $500,000 a year, while a fortunate few in the top income brackets are asked to pay their fair share. I believe that the overwhelming relief given to more than 90 million families under my plan makes it a clear winner for the American people; however, I recognize that those who have been asked to pay their fair share may disagree. I would invite them to step forward and discuss how they think they have been treated unfairly.
As demonstrated by the 1986 Tax Reform Act, tax simplification must be bipartisan, and my plan is the first step in that process. Those who have chosen to attack my bill without suggesting alternatives are simply defending the status quo, a posture that is outside the desires of the American people and the bulk of the business community.
It is regrettable that Congress and the administration have not worked together in recent years to enact bipartisan tax reform. When the American people elect leaders, they expect them to act responsibly. We cannot miss this opportunity.
Rep. Charlie Rangel (D-N.Y.) is chairman of the Ways and Means Committee.