The insane "Mother of All Tax Bills"

Kevin Hassett discusses at Bloomberg

For those of you wondering what the details of taxing the rich to pay for Democratic spending proposals might look like, Rangel, a close ally of Hillary Clinton, has provided a tour of the abyss. If the ``mother of all reforms,'' as he calls his tax plan, had a name, it would be Mrs. Bates. But, unlike Norman's mother in the Alfred Hitchcock classic ``Psycho,'' this lady is very much alive.

In terms of revenue, Rangel's reform would be the biggest tax increase in history. Compared to a baseline where President George W. Bush's tax cuts are extended and the dreaded alternative minimum tax isn't allowed to swallow millions of taxpayers whole, the bill raises taxes by a whopping $3.5 trillion over the next 10 years, according to the office of Representative Jim McCrery of Louisiana, the top Republican on the Ways and Means Committee.

To put that in perspective, that's about $2 trillion more than the 10-year cost of the Bush tax cuts enacted back in 2001.

But the revenue grab isn't the scariest part. That honor belongs to the increase in marginal tax rates, which is almost unfathomable in its scale. Rangel's main objective is to repeal the alternative minimum tax, which was originally designed to capture taxes from wealthy individuals but over the years has taken in more and more middle-income families.

48% Tax Rate

To accomplish that, and still collect the AMT revenue, he would enact a surtax on the adjusted gross incomes of wealthy taxpayers. If your family's income is above $200,000, then your surtax is 4 percent. If it's above $500,000, it's 4.6 percent.

But the tax increase on the wealthy doesn't stop there. When the Bush tax cuts expire in 2010, the top marginal rate goes back to 39.6 percent. In addition, Rangel would restore the phase-out of itemized deductions and personal exemptions that was repealed in Bush's 2001 bill.

The accountants' lobby must have been knocking at Rangel's door.

Tom Blumer was saying,

This is why you will almost never, if ever, hear the Charlie Rangel/Hillary Clinton crowd, whom I am tentatively naming "Team Chillary" (in honor of what they will do to the economy if they get their way), actually say that they want to raise the highest federal bracket to 39% or so with their MOAT, and then to 44% or so if the tax system in place since 2003 otherwise goes back to where it was in 2000 (this is usually referred to as "repealing the Bush tax cuts," but should be seen as a big tax increase over what we've been used to now for many years). Instead they speak of tiny-sounding 4% surtaxes and the like.

As the old psychiatrist said to Carmela, "You've been told. Now you can't say nobody warned you."

ore from Betsy.


Share on Facebook