I hope everyone saw Charlie Rangel’s cleverly nefarious tax hike proposal to pay for AMT reform.
What he intends to do is make more income subject to the top tax rates of 33 percent and 35 percent, by lowering the threshold for triggering those two tax rates. This would of course make more income subject to the higher tax rates. It would also abolish credits and deductions for those top earners.
Using this method, Rangel could say he hasn’t raised the marginal tax rate. But in effect, that’s exactly what he’s doing.
The big question now becomes what the Bush administration’s response will be.
The combined effect of all this would be a sizable tax hike on the most successful earners. Pro-growth tax reformers like myself have always argued for raising the bracket thresholds, thereby reducing the effective tax burden.
Mr. Rangel will appear on CNBC’s Kudlow and Company tonight to discuss his proposal.