Today’s BNA Daily Tax Report includes a story on Rep. Charles Rangel’s political displeasure over the failure to include AMT relief in current tax legislation. He laments that an extender on the capital gains and dividend tax rates was included, without any AMT relief. (Query: Is he “shocked”, as Claude Rains (Capt. Renalt) was in Casablanca?) The story indicates that these capital gain and dividend provisions only affect the “super wealthy” (to be fair – I don’t know if that was Mr. Rangel’s term) and they don’t expire until 2008, while the AMT fix is needed for 2006 and beyond.
I’m delighted that Mr. Rangel has concern for taxpayers that are actually paying federal income taxes. That’s quite a step for him. As we have previously written on these pages, the AMT has clearly gotten out of hand. The WSJ even picked up on this story yesterday, and they pointed out that the AMT actually hits the dividend and capital gain income tax preferences for people making upwards of $300,000 per year, potentially subjecting them to higher tax rates (e.g., 22 percent vs. 15 percent) on that income.
What has caused Mr. Rangel to speak out? Has he become a secret disciple of Grover Norquist? A look at his district might give us some idea. Here’s an excerpt from his website: “New York’s 15th covers a broad range of neighborhoods, blanketing Upper Manhattan from East 96th Street and West 91st Street on up. Outside the borough of Manhattan, the 15th stretches to include a small area of the Bronx, as well as Rikers Island, an incongruous appendage located off Manhattan in the East River and home to a New York City prison complex.” As a non-New Yorker (and darned proud of it), I am not intimately familiar with this area. However, I would guess that a fair number of constituents are potentially affected.
The 2001 tax year data for New York is located here:
(It is broken down by zip code, so if you know more about the district, you can break it down for us.) Of the approximately 8.375 million tax returns filed in New York state, 2.534 million (over ¼) have AGI over $50,000 – which makes them potentially subject to AMT. Given that AMT adjustments include state and local taxes, which are high in NY and in NYC, we see that this population could have even more reason to be affected.
I’m glad Mr. Rangel is worried about this issue. I just wish he could get more worried about the capital formation effects, as well as stock market valuation effects, that may result from raising capital gains and dividend treatment. We can simply wait and hope for more personal growth on his part: could this be “the beginning of a beautiful friendship” with conservatives?