(CNSNews.com) - Rep. Charlie Rangel (D-N.Y.) has unveiled his tax reform plan, saying it will "fix" the Alternative Minimum Tax (AMT) and provide tax relief to millions of Americans, but House Republicans say the bill is the "mother of all tax hikes" and will stymie economic growth.
Rangel introduced the Tax Reduction and Reform Act of 2007 on Thursday. "This legislation will provide tax relief to more than 90 million working families and cut the corporate tax rate to help American companies stay competitive internationally," he said.
"For too long, hardworking families have struggled to keep pace with the rising cost of living in America. This legislation would put money back in their pockets to combat the growing economic insecurity gripping our nation," he added.
Rangel said tax relief will come through a permanent repeal of the AMT, a refundable child tax credit, an increase in the standard deduction and enhanced earned income tax credit.
(The AMT, launched in 1970, is designed to prevent individuals in high-income brackets from avoiding certain taxes, such as long-term capital gains and some personal exemptions; in recent years, however, the AMT has been increasingly applied to people making $75,000 to $250,000 who take standard deductions, such as those for property and children.)
"The provisions in this bill would reform the tax code to provide a greater sense of equity and fairness that is so critical to our voluntary tax system," said Rangel.
But House Republicans were not pleased with the bill.
"The proposal unveiled this morning by Chairman Rangel clearly is the largest tax increase ever proposed on the American people," said House Minority Leader John Boehner (R-Ohio) at a press conference on Thursday. "This is not what the American people want. American families are stretched to the limit today. The last thing they need is higher tax bills."
"Chairman Rangel will claim that these tax increases go to provide tax cuts to 90 million Americans, but he is selling pure snake-oil," said Rep. Jim McCrery (R-La.), ranking member of the House Ways and Means Committee. "Many if not most of those taxpayers are getting a purely imaginary 'tax cut.'"
McCrery explained that "some of them are the roughly 20 million people that Republicans shielded with the Alternative Minimum Tax patch. Millions more are people who have benefited from the 2001 and 2003 tax cuts, and only get tax cuts if you assume that the 10 percent bracket, marriage penalty, and $1,000 per child tax credit will expire."
He added that the bill will add a 4 percent surtax on Americans earning more than $150,000 a year, or $200,000 for couples.
"That is on top of the scheduled expiration of the 2001 and 2003 tax cuts," McCrery noted. "So, under the Democrats' plan, over the next few years, the individual income top tax rate in the United States will rise from 35 percent to 44 percent."
But Rangel said, "The package I proposed today is entirely revenue-neutral to ensure that the tax cuts we provide are not paid for by future generations or through reckless borrowing, as has been the case in recent years."
"They aren't paying for a tax cut or a series of tax cuts," countered McCrery, adding that Democrats are abiding by the tax increase that is assumed in the Congressional Budget Office (CBO) baseline of $3.5 trillion.
"We've had a history now for over a quarter of a century of proving that the American people do a better job growing the economy with their money than the American government does," added Rep. Roy Blunt (R-Mo.). "We know now what happens if they (Democrats) win."
"Very seldom in politics do your opponents give you this kind of gift," Blunt said. "Very seldom in politics do your opponents say, 'if we could just elect a president, and if we could hold on to the House and the Senate, here's what we're going to do: we're going to raise taxes on every small business in America that's not a corporation, we're going to increase the marriage penalty [and] eliminate marriage penalty relief.'"
"This hurts the very people the Democrats claim to want to help - those people at the lower end of the economic ladder, who need jobs and good paying jobs," McCrery said. "Their model, their plan, their roadmap is the wrong way to help these people."
Chris Edwards, director of tax policy studies at the Cato Institute and former senior economist on the congressional Joint Economic Committee examining tax issues, said: "The major drawback in Rangel's plan is its fixation on balancing all tax cuts with tax increases, thus both aiding and damaging the economy at the same time," Edwards said.
"Indeed, the overall package would impose a big tax increase because the repeal of the alternative minimum tax is not really a tax cut; it's just the prevention of a huge $1 trillion future tax increase," Edwards added.
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