Morality and Charlie Rangel’s Taxes

Morality and Charlie Rangel’s Taxes. WSJ Editorial
It’s much easier to raise taxes if you don’t pay them.
WSJ, Jul 27, 2009

Ever notice that those who endorse high taxes and those who actually pay them aren’t the same people? Consider the curious case of Ways and Means Chairman Charlie Rangel, who is leading the charge for a new 5.4-percentage point income tax surcharge and recently called it “the moral thing to do.” About his own tax liability he seems less, well, fervent.

Exhibit A concerns a rental property Mr. Rangel purchased in 1987 at the Punta Cana Yacht Club in the Dominican Republic. The rental income from that property ought to be substantial since it is a luxury beach-front villa and is more often than not rented out. But when the National Legal and Policy Center looked at Mr. Rangel’s House financial disclosure forms in August, it noted that his reported income looked suspiciously low. In 2004 and 2005, he reported no more than $5,000, and in 2006 and 2007 no income at all from the property.

The Congressman initially denied there was any unreported income. But reporters quickly showed that the villa is among the most desirable at Punta Cana and that it rents for $500 a night in the low season, and as much as $1,100 a night in peak season. Last year it was fully booked between December 15 and April 15.

Mr. Rangel soon admitted having failed to report rental income of $75,000 over the years. First he blamed his wife for the oversight because he said she was supposed to be managing the property. Then he blamed the language barrier. “Every time I thought I was getting somewhere, they’d start speaking Spanish,” Mr. Rangel explained.

Mr. Rangel promised last fall to amend his tax returns, pay what is due and correct the information on his annual financial disclosure form. But the deadline for the 2008 filing was May 15 and as of last week he still had not filed. His press spokesman declined to answer questions about anything related to his ethics problems.

Besides not paying those pesky taxes, Mr. Rangel had other reasons for wanting to hide income. As the tenant of four rent-stabilized apartments in Harlem, the Congressman needed to keep his annual reported income below $175,000, lest he be ineligible as a hardship case for rent control. (He also used one of the apartments as an office in violation of rent-control rules, but that’s another story.)

Mr. Rangel said last fall that “I never had any idea that I got any income’’ from the villa. Try using that one the next time the IRS comes after you. Equally interesting is his claim that he didn’t know that the developer of the Dominican Republic villa had converted his $52,000 mortgage to an interest-free loan in 1990. That would seem to violate House rules on gifts, which say Members may only accept loans on “terms that are generally available to the public.” Try getting an interest-free loan from your banker.

The National Legal and Policy Center also says it has confirmed that Mr. Rangel owned a home in Washington from 1971-2000 and during that time claimed a “homestead” exemption that allowed him to save on his District of Columbia property taxes. However, the homestead exemption only applies to a principal residence, and the Washington home could not have qualified as such since Mr. Rangel’s rent-stabilized apartments in New York have the same requirement.

The House Ethics Committee is investigating Mr. Rangel on no fewer than six separate issues, including his failure to report the no-interest loan on his Punta Cana villa and his use of rent-stabilized apartments. It is also investigating his fund raising for the Charles B. Rangel Center for Public Service at City College of New York. New York labor attorney Theodore Kheel, one of the principal owners of the Punta Cana resort, is an important donor to the Rangel Center.

All of this has previously appeared in print in one place or another, and we salute the reporters who did the leg work. We thought we’d summarize it now for readers who are confronted with the prospect of much higher tax bills, and who might like to know how a leading Democrat defines “moral” behavior when the taxes hit close to his homes.