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Tuesday, September 16, 2008 - Vol. 10, No. 221
Today's comment is by Bob Bauman, JD, Legal Counsel and Senior Writer for The Sovereign Society.
Sadly, Americans have come to expect a certain degree of hypocrisy from most politicians.
Hypocrisy is defined as the act of professing beliefs, feelings, or virtues that one does not really possess. In other words, it's a fraud - especially when a certain person's actions secretly contradict what he's been preaching.
But I can think of a better definition of hypocrisy.
Enter Charlie Rangel, Democrat congressman from Harlem. He's the dean of the New York delegation and a 37-year veteran of the U.S. House of Representatives. He's now chairman of the powerful House Ways and Means Committee that writes all of America's tax laws.
I served in the House some years ago with Charlie and found him, in spite of our philosophical differences, to be a genial gentleman with a great sense of humor.
However over the past 10 years, I have come to know a different Charlie Rangel all too well.
For years Rangel has advocated a huge "exit tax" on any American citizen or long-time resident alien who decides they want formally to end their U.S. citizenship, (which is still legally within their rights).
Try to Expatriate and You Could Lose 50% of Your Assets
Rangel tried and failed to get his onerous tax enacted into law in 2004 and 2005 when the Republicans controlled the Congress. Once the Democrats came to power after the 2006 elections, Rangel found a way to pass his beloved exit tax.
He slipped this horrendous tax into a popular military and veterans pension/pay bill, (without hearings or public notice). President Bush didn't want to mess with this long-time veterans' lobby, so he signed it into law on June 4, 2008.
The Rangel exit tax assumes all wealthy expats are trying to avoid paying U.S. tax. You're officially a "tax traitor" if you try to expatriate and you either paid more than US$124,000 in net taxes for the previous five years, or you have a net worth of more than US$2 million. No proof of intent needed.
With some variations, the tax is about 50% of the value of all your assets no matter where you're located.
Needless to say, over the years Rep. Rangel argued for his exit tax. He treated "the rich" who might avoid U.S. taxes offshore as the worst possible ingrates and villains.
He insisted that rich Americans have a special obligation to pay their fair share of taxes so that poorer Americans don't get stuck with paying the tax bill. He railed against offshore "tax havens" where rich Americans hide their cash and fail to pay taxes.
Charlie Cheats the System at Home...
In July, The New York Times disclosed that the New York developer, the Olnick Organization, allowed Rep. Rangel to lease four rent-stabilized apartments in a luxury Harlem condo high-rise at prices far below market value.
He used one as a campaign office and disregarded New York state requirements that rent-stabilized apartments are only used for a primary residence. Rep. Rangel agreed to give up the campaign office, but he claimed there was nothing improper about keeping the three other apartments. He pointed out that a previous tenant combined two of the units by removing a wall.
While it is not illegal for landlords to allow a tenant to lease multiple rent-stabilized apartments, some government ethics experts said you could consider the hundreds of thousands of dollars in rent savings Mr. Rangel received as a gift and a violation of the US$100 annual limit on gifts to House members.
...AND Abroad!
It turns out Exit Tax Charlie has owned his very own offshore tax haven since way back in 1988 down on Tortuga Bay in the sunny Dominican Republic!
Rep. Rangel has owned a luxury beachfront house at the posh Punta Cana Resort and Club. But the Congress' head tax lawmaker has never reported to the IRS or paid any taxes on over US$75,000 in rental income he's earned over the last 20 years on the beach house. He also failed to list that income on his New York tax returns. Not bad for the man in charge of the Internal Revenue Code. On top of that, he got his US$54,000 mortgage loan on his villa interest free, a happy fact which he swears he didn't know. He paid it off in 2003.
Deferred Taxes are Apparently Charlie's Specialty
In the past Rep. Rangel has been a fierce advocate of repealing the current legal deferral of income taxes on offshore hedge fund managers.
He said he wanted to shut a tax loophole allowing some hedge fund managers to defer taxes on billions of dollars in compensation from offshore funds. The provision would require fund managers to pay taxes immediately on income that is now tax deferred.
But until now we really didn't know what an expert Charlie was on how to personally defer taxes. You just don't pay them!
No Habla Espanol Senor Rangel?
At a Capitol Hill press conference, Mr. Rangel took turns being remorseful and defiant. Then he swore he didn't realize he had unreported income or unpaid taxes.
He claimed he had trouble getting detailed financial statements from the resort's managers in the Dominican Republic.
"Every time I thought I was getting somewhere, they'd start speaking Spanish," Rangel told reporters.
This, from an experienced lawyer who has many bilingual staff members and represents a district that's over 40% Spanish speaking.
Republicans in the House have reacted with calls for Chairman Rangel to resign his chairmanship. But the 78-year-old congressman - who has been in the House since 1971 - brushed aside calls that he step down as chairman of the House Ways and Means Committee.
He accused Republicans of politicizing his financial issues. He said he would pay several thousand dollars in federal taxes he owes after failing to report US$75,000 in rental income from the villa.
Meanwhile, House Speaker Nancy Pelosi (D-CA), has referred the entire Rangel matter to the House Ethics Committee.
Don't hold your breath.
Knowing the ways of Capitol Hill as I do, I seriously doubt that this will mean an exit for "Exit Tax Charlie."
BOB BAUMAN, Legal Counsel
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