RUSH: Charles Rangel finally has announced his mother of all tax hikes, the largest single tax increase in American history, over $1 trillion. I have been studying the way the Drive-By Media has been reporting this today. Folks, it is journalistic malpractice. Actually, his politics on this are pretty shrewd, given he knows he has buddies in the Drive-By Media. The way they’re spinning this is that Rangel has to get rid of the alternative minimum tax, because it’s creaming people it was never intended to cream. It’s supposed to cream the rich. Now it’s screaming the middle class. There’s a lesson in this, folks, by the way. All these things aimed at the rich are eventually going to get to you. They’re always about you in the first place. So he’s going to get rid of that. People are going to go, ‘Yeah, yeah, yeah, get rid of it.’ He has two weeks to get rid of the alternative minimum tax, from what I understand, anyway, because if they don’t get it done in two weeks, then the IRS can’t reprogram their computers to do everybody’s tax returns and calculate this and that starting in January.
Now, how’s he going to pay for the alternative minimum tax? Well, this is what the Drive-Bys are eating up. What the Drive-Bys are just loving and everybody else is loving is he’s going to raise taxes on hedge fund managers, he’s going to raise taxes on asset managers, and there’s a 20-80 rule that allows certain hedge fund managers and asset portfolio managers to take 20% of their fee in earned income and 80%, the growth or the gain in the fund at the capital gains rate, which is 15%. So he wants to raise the capital gains rate, he wants to eliminate that, charge these guys. Now, the money for that is going to come out of the earnings, and the earnings are invested by teachers and public employees and all these unions that have their pension plans invested in various portfolios, assets, hedge funds, and so forth and so on. So while the press is disguising for Dingy Harry the fact it’s a big middle class tax cut, we’re going to soak the rich, ultimately in the end, it’s the middle class investor who’s going to get screwed on this. But the worst part about it is that what the Drive-Bys are leaving out; the New York Times left it out, the Associated Press left it out. One place I saw might have touched on it briefly, but here’s the thing.
Rangel’s tax bill will add a 4% surtax on Americans earning more than $150,000 a year. (interruption) Yeah, of course you didn’t read that, Mr. Snerdley, because it’s not in the stories. That’s what I meant. I did an expert show prep analysis of the Drive-By Media on this. The bill will add a 4% surtax on Americans earning more than $150,000 a year. It will be 4% surtax on couples who earn $200,000 a year or more. That is on top of the scheduled expiration of the 2001 and 2003 tax cuts, which will expire in 2010. So under Charlie Rangel’s plan, forget this AMT business for a minute, forget soaking the rich on the corporate side and the hedge fund side and all that — oh, by the way, he’s going to cut corporate taxes, too, from 35 to 31%, but corporations don’t pay taxes, you do, we all do. At any rate, so after his 4% surtax on single people earning more than he 150 grand — by the way, who’s married anymore? You know, $200,000 for married couples, less than half the country’s married these days. You have a lot of single people that are going to be affected by this.
Here’s how this is going to end up. You let the current tax cuts expire, you add the 4% surtax, and over the next few years the individual income top tax rate in the United States will rise from 35% to 44%. By way of comparison, the other 29 Organization for Economic Cooperation and Development countries, basically other developed nations, have an average top marginal tax rate of 35.7%. In fact, only five OECD countries would have a higher top marginal tax rate in 2011 than the United States if the Democrats’ bill is enacted. Now, Rangel knows that he’s not going to get this bill passed and signed into law this year, but he is going to try this AMT business. He wants to cherry pick the AMT business, but this is a test, the whole floating of the proposal to see how it goes is a test, but I’ll tell you what it is. It is precisely what would happen if the Democrats win the White House in 2008, because when they’re inaugurated in 2009, this is exactly — the Clintons did it, raised taxes. So we’re looking at a top marginal rate of 44%, and everybody else’s rates are going to go up accordingly, folks, don’t think yours won’t.
RUSH: Rangel is 77 years old, and he’s not taking the long view of anything, obviously. When you’re 77, you don’t take the long view. He wants this done now. These people are telling us right out in the open, right out in full daylight just who they are and what they want. This large a tax increase would destroy the economy. It would literally… Well, ‘destroy’; it would destroy the trend, growth trend that we’re on. It’s just mind-boggling. Now, the presidential candidates have not weighed in on this yet, but all tax legislation originates in the Ways and Means Committee in the House, and all spending bills originate there. The president can send over his ideas, and if he controls the White House and they control the various houses of Congress, then that will probably be what will happen. That’s why if Hillary gets in there, or any of the other Democrats get in there and Rangel remains as chairman of the Ways and Means Committee, you’re basically looking at what they’re going to try to do, and how they’re going to try to get people to believe it’s not what it actually is. They’re going to try to make you think it’s a big middle-class tax cut by really, really soaking the rich.
If you go look at these AP reporters and all these other Drive-By Media people reporting on this, these people don’t make 150 grand a year, so they don’t care. They don’t make 150 grand. To them, that’s fine. ‘Soak the rich.’ They love, by the way, the whole class-envy business of soaking the rich in the first place. So they’re happy to not dig deep and find the true details of this. They don’t even put in — these stories did not even include — the 4% surtax on the income of 150 grand a year for singles, 200 grand for couples. But this surtax, folks, is on adjusted gross tax, not taxable income. Sounds technical, but it’s not. It means that Rangel’s bill will erode the value of a lot of tax deductions, including for mortgage interest and charitable giving and medical expenses, because the surtax is on adjusted gross, not taxable. It’s on the top.
RUSH: I want to spend a little bit more time on Rangel’s tax bill that he unveiled last night. It’s a test. Most of it is not going to be enacted this year. He knows the president would never sign it; the House probably wouldn’t pass it. This is just a preview. It’s sort of like getting a beta, if you’re into computer software, this is like getting the beta before the final release, which, in Rangel’s dream world, will be 2009. So the key ingredient that is being left out of all the reporting today in the Drive-By Media on Rangel’s trillion-dollar tax increase, 4% surtax on single Americans earning more than 150,000 a year, $200,000 for couples, that will take the individual top marginal rates in the US from 35 to 44%, is that when you combine that 4% surtax with the expiration of the current tax cuts that were enacted in 2001 and 2003, these new tax rates will affect approximately ten million taxpayers directly, including those who report business income like small business owners and farmers. But the damage then ripples through the economy, because small business and family farms pay their income taxes as individuals. You’re allowed to do that. If you’re a sub-S, you can file on a personal income form, and you’re just taking money out of the engine that fuels the creation of jobs.
Now, this surtax is also on adjusted gross income, not your taxable income. Now, tax terms, they sound technical and off putting, but what that means is that Charles Rangel’s new tax bill will erode the value of a bunch of tax deductions that you have now: mortgage interest, charitable giving, medical expenses, state and local taxes, and the standard deduction. And because the surtax kicks in at $150,000 for individuals and $200,000 for couples, this bill creates a monster of a marriage penalty. We thought we got rid of the marriage penalty. Right now they’re bringing it back with this surtax. You remember how upset you were. Let’s go back, ’87 we did the big tax reform with Reagan and rates came down from 50 to 31 — I don’t remember the year. Remember when a tax code change eliminated your ability to deduct interest on your credit card payments? You remember that day, Mr. Snerdley? Oh, people called here and were furious. I will never forget, we got a call from a woman in Illinois who was just going through the roof, and I said, ‘Ma’am, calm down, this is actually a good thing. Why do you think it’s such a big deal to deduct interest on your credit card?’ ‘Well, because it just is. It makes it cheaper.’ ‘No, it doesn’t. Do you realize how much in debt you’re going by not paying the balance in full every month?’
Deductions are the magic word to make the middle class think that they’re operating like the big guys, because they think the big guys are deducting everything, get away with paying no taxes, get to deduct this, everything is a business expense, write this off, write that off. Well, you have to have it to write it off, and you have to lose it to write it off, if it’s a genuine loss. So they took that away. People got fed up. If this bill becomes law, if it ever gets signed into law, what it means is that, for example, your mortgage interest, not all of it will be tax deductible, only a portion of it would be. Yes, only a portion. Only a portion of your charitable contributions would be deductible. Only a portion of your medical expenses would be deductible, not the full — (interruption) yes, because the surtax is going to be on adjusted gross income, not taxable. It’s going to be on the highest amount — before you take all your deductions, before you take all those things to get to your taxable income, the AGI, you’re going to be taxed on the higher amount, not quite your gross, because it’s standard deduction, things come out of there, but you’re going to get taxed on the highest amount.
So it’s going to lessen the value of the deductions that you currently have. And, of course, the mortgage interest, that’s a big deal, and the Realtors association, the home builders and all these guys are going to get involved in this, they try — (interruption) what? When you file your taxes, you’ve got two different kinds of income. You’ve got your gross, the adjusted gross income, and then that which is taxable income. From the AGI, you are given the standard deduction based on kids that you have, a number of other things that will reduce. The surtax, the 4% surtax, will be tacked on to the higher amount, not your taxable income. That surtax taking your rate at the upper bracket from 35% to 44% is going to impact the percentage of all of these things you can take interest deductions on. So you’re not going to lose the mortgage interest deduction, because the surtax that you’ve gotta pay — I mean, the money that you would get, the money you would save, be able to deduct the interest, is going back to the government in the form of a surtax. They’re just taking it back. You’re going to get the deduction, but you’re never going to see it because it’s going to be a surtax. This is for people 150 grand or over, and some of you in this audience are not in that bracket and if you’re married, some of you are not in that bracket, but you’re trying to be, aren’t you? You’re aiming for that.
We all want to improve our standard of living, we all want raises, we all want new opportunities. You’re aiming for that, are you not? Don’t sit there and say, ‘Good, make those people pay, yeah, yeah,’ because you’re next. You’re next. It’s like I’ve been trying to tell you on this S-CHIP program, they’re going to pay for this by taxing cigarettes another dollar a pack, and you’re sitting there, probably some of you say, ‘Well, that’s good, I don’t smoke, make those filthy people, polluting the planet, causing cancer, make them pay the tax.’ Right. Well, when you allow — and this is classic, used to the same trick — rather than just soak everybody at once, you pick a group, an unpopular group at first to make them pay the tax, like smokers. Who’s going to defend smokers? Well, as I’ve warned you, smokers are not going to be allowed to use the product very often and in very many places in the future. You couple the fact they can’t use the product legally in a lot of places with the fact it’s going to cost through the roof now and you’re going to have fewer people buying the product, which is going to generate less tax revenue. Guess who’s next to pay for it? You, who were laughing and clapping your hands.
These people deserve Medals of Honor, these smokers. They’re paying for so much in society now, you wouldn’t believe it. They deserve your respect, folks. Anyway, I’m off the beaten path. It’s the same thing here with Rangel’s system. It also creates the marriage penalty. Now, here’s the key to this. The key that Rangel is hoping to use to get the Drive-Bys all for it and, as many Democrats as possible, including some Republicans, is the alternative minimum tax. You know the alternative minimum tax is catching more and more people it was never intended to catch. It was originally created because back in the days, there were like 20 families, one tax year, wealthy, super-rich families, who paid zero income tax, and they didn’t cheat, they just used the existing tax code of the day, and they were able to end up paying no income tax. Well, that was reported, and, of course, everybody had a cow, and so they came up with the alternative minimum tax, which is what it says. Even if you don’t owe tax you’re going to pay it because there’s a minimum out there, and here’s the formula.
Well, as is always the case with government created programs run by liberals, guess who it’s catching? It’s catching you. It’s catching more and more of the middle class and there’s a firestorm erupting over it. The Republicans did come up with a minor patch for it that’s been in place, but it’s not anything really drastic. So Rangel — and the key to his plan in selling it, is he’s going to get rid of it. He’s going to get rid of the alternative minimum tax. But, but, but, big ‘but’ here — as government operates, they are going to cut the alternative minimum tax, but they can’t do without that money. This is called the pay-go system. Government will take tax money from you and make you do with what little you have left. They will never do with less. You cannot cut government’s taxes, essentially. So they’re going to get rid of the AMT, okay? Well, that brings in a lot of money, which is why they haven’t gotten rid of it now and already. So the AMT being eliminated really does not have to be paid for.
This is a selling point that the Republicans could use. The government never meant for the AMT to affect middle class Americans, and government has a responsibility to make sure that it doesn’t. Now, by arguing that preventing this tax increase requires us to raise taxes elsewhere, Democrats are trying to lock the Congress into a system where we are guaranteed to raise taxes by three-and-a-half trillion dollars over ten years. That’s where Rangel’s plan ends up over ten years, three-and-a-half trillion. The baseline that the Democrats are using for pay-go includes revenue from an unpatched AMT and from the tax increases that occur when the ’01 and ’03 tax laws expire after 2010. Now, those things together total three-and-a-half trillion dollars over ten years. So if you use the Democrats’ pay-as-you-go rule, that is the size of the tax increase that’s being imposed on the American people, because getting rid of the AMT — see, the reason, in a moral and just world, the AMT has flown way out of control. It was never intended to raise the money that it’s raising, and so that money technically was never intended to go to the government — ahem — so they don’t need to recover it if they give that money back or if they eliminate that tax.
But that’s not how government works; it’s not how the Democrats work. If there is a tax cut somewhere, there’s gotta be a tax increase someplace else. So Rangel — the key to selling this is getting rid of the AMT and soaking the rich. That’s what the Drive-By Media is out selling, and that’s what they’re going to continue to sell and hype. It’s going to be the old class envy game. They’re going to try to get as many people as possible to clap their hands and jump for joy that the AMT is going away, and these rich people, who are stealing everything they’ve got, are going to get soaked again. Think back, folks, every time this has happened, that you’ve been an adult, when you’ve been told that the rich are getting soaked, ask yourself, go back to those days and tell me just how that helped you in a financial sense.
RUSH: Well, here’s an easy way to understand this AMT business, folks. Think of the Alternative Minimum Tax as a mistake. It did what it was not intended to do, theoretically. Let’s not even get into that. It was a mistake. It raised taxes by mistake. It collected money it was not intended to collect. So you get rid of it. It was a mistake. Sorry. You do not then come up with new increases in taxes because you’re going to lose money you should have never had in the first place because you had a mistake. Yet that’s what they’re going to do. Now, I’ve got the AP story on this, — and I told you I scoured (as your steward, as in service to humanity as I am and you) — I scoured the Drive-By Media looking at news stories on this, and I want to read to you the way the AP — and what is this clown’s name? Uhhh, let’s see. I guess it doesn’t matter. I just love mentions of these clowns. It’s Jim Abrams. I’m just going to go on the end of the story. ‘Under the Rangel plan, with costs and new revenues over a ten-year period, married couples filing jointly would be entitled to take an additional $850 as a standard deduction, at a cost of $48 billion.’ Every tax cut has a ‘cost’ to the government, and it’s going to be picked up somewhere else.
You never see the annual budget go down, do you? Nowhere in this list are you going to hear about the 4% surtax on single income, 150-grand; married couple income, 200 grand. Next one: ‘The number of lower income taxpayers qualifying for earned income credit would grow at a cost of $29 billion. The refundable child credit would be increased at a cost of nine billion. Investment fund managers would be prevented from paying taxes at capital gains rates, raising $26 billion, hedge financed managers would be prevented from using offshore tax haven corporations to defer taxes,’ and so forth, raising $23 billion. ‘There would be mandatory cost basis reporting by brokers for transactions involving publicly traded securities raising $4 billion.’ That one’s somewhat complicated. It would be tough to explain, a lot of numbers in a verbal sense, in an audio sense. I might give it a shot. But the bottom line here is that the real tax increase in this bill is not reported in the Drive-By Media, anywhere. Let me grab a quick phone call here before we have to go to the another break. It’s Tampa. This is Mike. Nice to have you on the program, sir. Hello.
CALLER: Hey. Mega dittos from Wesley Chapel, Florida. How you doing, Rush?
RUSH: Fine, sir. Thank you very much.
CALLER: Hey, the thing that got my goat: I was reading the Wall Street Journal article yesterday, and the line that caught my attention was how US manufacturers are going to be penalized by this whole bill, and it’s going to cause them to go overseas. Charlie Rangel is the same guy that’s going to sit here after it goes through, and blame us, blame manufacturers for going overseas, when he’s part of the problem.
RUSH: Well, it’s a good point, and you know why this happens, because Democrats — plus, the government agencies that score these tax increases and tax cut bills — do it statically. They do not dynamically score what happens. So you’re exactly right. You raise taxes on a certain segment of society, say on manufacturing.
RUSH: What are the people that own those businesses going to do?
RUSH: They are not going to sit there and pay Charlie Rangel the money. They’re going to go where it’s cheaper to operate! Hello, China —
RUSH: — or hello, Mexico. They’re going to go where it’s cheaper to operate, and then Charlie Rangel is going to come back and not understand why his tax increase isn’t raising the revenue he thought it was going to raise —
RUSH: — and he’s going to complain and whine about the lack of Americanism on the part of these manufacturers taking these jobs overseas, because they don’t understand… Well, I don’t know if they understand it or not, but they think that people are just going to sit out there, ‘Okay, you got a new tax increase. Your tax rate is 44%. Fork it over.’ They just think they’ll say, ‘Okay, here it is.’
CALLER: And this was a huge —
RUSH: They just think that people are static, and things are not fluid, and there isn’t any dynamism in the economy. This is why the tax cuts work, and they never do score them properly. They score them strictly on a zero-sum game, without using any dynamics at all. Tax cuts increase investment. There’s more money to play with and spend, invest, what have you. That’s why the economy goes through the roof every time it happens. More jobs are created, more revenue. This tax increase has been proposed, folks, during record period of tax collection and revenue generation for the government.
RUSH: One other way to look at this tax increase: this is Hillary’s tax increase. Rangel always is the front man, the forward operator on Hillary’s plans. He was the first to raise the idea of her running for the Senate. This is Hillary Clinton’s tax increase. Rangel is 77. He can’t have a long view about anything.