Rangel Tax Gaffe Could Give Republicans Huge Boost in 2008

Posted: Nov 08, 2007 12:01 AM
Rangel Tax Gaffe Could Give Republicans Huge Boost in 2008

WASHINGTON -- Republican strategists expect to gain Congressional seats and GOP favor in 2008, predicting that Charlie Rangel's, D-N.Y., new tax bill will be a bust with the American public.

Rangel's bill has a few good things in it, like lowering corporate rates, but he hopes to accomplish this and other goals by raising taxes on millions of small businesses, investors and two-earner couples.

Democrats have every right to be worried. Why unveil a tax bill as Democrats approach a pivotal election year? Why give Republicans an early campaign target to shoot down, especially one that isn't going anywhere next year?

Republicans, on the other hand, are gleeful at the prospect of running against what they call an income redistribution scheme that will improve their chances of making gains in Congress and in the presidential election.

At a strategy meeting called by anti-tax crusader Grover Norquist, Tom Reynolds, R-N.Y., who ran the House Republican campaign committee last year, said voter anger over the bill "will boost GOP numbers in the House."

Former House Majority Leader Dick Armey laid out the likely Republican counteroffensive for 2008: "It's obviously a grand income redistribution scheme by Charlie Rangel to raise taxes on working Americans, so they can take more people off the tax rolls and pay for Hillary Clinton's plan to take over health care."

"It helps Republicans and gives us something to run against, something serious. Rangel's given Republicans hope that they could take the House back," Armey told me.

Norquist is even more ecstatic over Rangel's plan, calling it "the longest suicide note in recent history."

"It's a tremendous opportunity for the Republicans. This is a gift from the gods. This is something Republicans could not have done for themselves," he said.

Rangel's plan would slap a hefty 4 percent surtax on single taxpayers who earn more than $150,000 and on married couples making more than $200,000. In effect, they are "putting a massive new marriage penalty into the tax code," Ways and Means Republicans charged.

Democrats argue that they are merely taxing the rich, though a wife and husband who each earn $100,000 could be plumbers, autoworkers, chefs or office managers. Add a few children, and these taxpayers hardly consider themselves rich.

The new surtax that Rangel wants to impose on working Americans would also affect an estimated 24 million small businesses that pay their taxes through individual tax returns. Many will lose deductions that lower their taxes on business income, while incorporated businesses will benefit from a rate cut. Rangel Democrats say these higher tax rates will only be applied to the rich, but GOP strategists say that argument instinctively triggers doubts among most taxpayers.

"Whenever the Democrats say they are raising taxes on the rich, most of the public thinks it will hit the middleclass, and Republicans will start making that argument," said Cesar Conda, a veteran economic-policy strategist and adviser for Mitt Romney.

Despite this mind-boggling gaffe by Rangel, Republican tax-cut champion Jack Kemp, the high-energy architect of the Reagan tax-cut agenda of the 1980s, offers words of caution for his party. "It isn't enough to be against Rangel's bill, we have to offer our own proposals. He has, to his credit, begun a debate over tax reform that lowers the corporate tax rate from 35 percent to 30 percent," Kemp told me.

Polls show that taxes remain a key issue for millions of Americans who think they're too high, and Kemp thinks that it could throw Democrats on the defensive next year.

"If Democrats were to endorse Rangel's plan, it would definitely lead to Republican gains in the House and Senate. If our presidential candidate spells out what is wrong with the Rangel bill and proposes a tax system that is flatter, simpler and fairer, we'll have a winning issue in 2008," he said.