It took him a while—36 years—but Representative Charles Rangel, the Harlem Democrat, is finally one of the most powerful figures in Washington: chairman of the mighty House Ways and Means Committee, which originates all federal tax legislation. And if the 77-year-old Rangel has his way, your income taxes just might be going up.

"I can see how you can reach that conclusion," the blunt-spoken 18-term congressman tells Portfolio.com in an exclusive interview. "But I never would think about giving any reporter a quote from me that says ‘Rangel says he's going to raise the tax rates for the rich.' I would never say that. I'm saying that what scares the hell out of so many people, especially those that are in hedge funds, is that I want to be able to say at the end of the day that it's a fair and equitable system that has the confidence of the taxpayers. And they say, ‘He's coming after us. Goddamn it, that's what Rangel meant!'"

What Rangel will say is that he wants to eliminate the Alternative Minimum Tax. The A.M.T, originally aimed at the wealthy who were not paying any taxes, has since ensnared millions of middle-class taxpayers.
 
"If I'm honest enough to tell you that rates have to be changed in order to accomplish the elimination of the Alternative Minimum Tax, no matter how you frame the question, some people are going to pay more taxes, and most people are going to pay less taxes," Rangel says.

"Well, who in the hell is going to pay more?" he adds. "Those who enjoy loopholes or what appear to be unfair advantages in terms of rates are going to pay more."
 
Rangel, who contends that fewer than a million taxpayers have benefited from the Bush tax cuts, says he's not hearing any complaints from the upper classes—at least not yet. "I don't go to those people that may have a rate increase—I don't know them," he says. "They don't come to see me. They don't like me!'"

During an hour-long sit-down, the dapper Rangel also discussed his friendship with Treasury Secretary Henry Paulson, his public trash-talking with Vice President Dick Cheney, and his loyal support for presidential candidate Hillary Clinton—who, he predicts, "will be the nominee that would eat anybody's lunch," especially Rudy Giuliani's.

Lloyd Grove: Thank you so much for doing this.

Charlie Rangel: Sure, glad to. It's good for people to know what I'm thinking rather than for them to guess what I'm thinking.

L.G.: A lot of people are guessing what you're thinking. So, let me just start. The top marginal income tax rate is 35 percent. The economy seems to be doing fairly well, with a 4 percent growth rate. The I.R.S. figures show that revenue has actually gone up since the Bush tax cuts and that the deficit is under what it would have been. So what's broke that you want to fix?

C.R.: If we're reading the same reports, and you're not trying to be provocative but really trying to get to candid answers, don't those same reports indicate that income is up, [the categories of] working families are up, more people are working is up, longer hours are up, and that whether the lower tax rate on the top was responsible for the increase in growth is by some economists questioned? And whether or not the tax cuts paid for themselves, as opposed to money being borrowed, are just questions? I never said—and that's why I welcome this interview—that anything was broken. Your questions are framed as though Rangel has made up his mind to go after the wealthy who are enjoying the Bush tax cuts. "Why are you doing this if nothing is broken?" So my response to your carefully prepared question is—

L.G.: Not that carefully prepared.

C.R.: —I didn't say anything was broken! But I am anxious to tell you what I did say and will say.

Our committee has a responsibility to look at this tax code—the size of it, the complexity of it—and to realize that simplification is just as important politically as whether or not we can allow a volunteer tax system to exist because people believe it's fair. Fairness has to do with how you set the rates for different categories of taxpayers. And if the rates are different—as we've experienced with carried interest where certain people have 15 percent, others have 35 percent—or hard workers in the office are paying at 35 percent, while for people who do less than laborious work it's 15 percent. It's not just a question of who deserves what, or what would be the economic incentives. It's "What does the average taxpayer think about the code?" So the very first thing that Republicans and I agreed upon was that the Alternative Minimum Tax was one impediment for people having confidence in the tax system. And that is why I wanted to start out by saying that what attracted our attention in a bipartisan way was the Alternative Minimum Tax, and the desire to eliminate it completely.

L.G.: And in order to pay for that, you're going to have to get revenue elsewhere.

C.R.: Back up just one step before I catch up with your question. If we don't extend 2010 [President Bush's tax cuts], or don't even consider it, it [eliminating the A.M.T.] is going to be an $800 billion revenue loser. If we do extend the 2010 tax cut, it's going to be doubled. Now comes your question, well if it's going to be a trillion or more, how the hell are you going to pay for it and how does it impact the top rates?

L.G.: Okay.

C.R.: Okay. Well, we know how much it's going to cost. We hear from I.R.S. that there's $340 billion to $350 billion out there uncollected. We also hear politically that it'll be very difficult to collect it, but it's out there. We know that in that tax system, there will be recommendations from Treasury and I.R.S. about what used to be "incentives" that now have become "loopholes" because people have forgotten why they're in the code. So we've been combing through those to see collectively what that would be. I have never looked at the hedge funds or the private-partnership tax rates as a source of revenue, because there could be some explanation as to why there are dramatic differences in the rates between partnerships and corporations. And while I as chairman have not seen it, it is possible that there's revenue there. And as we talk, the Joint Tax Committee is trying to see how much all of these different rates cost—from mortgage interest deductions, charitable deductions, local and state tax deductions, and even adding some, our extenders, which include research and development. At the end of the day, someone's got to say, "You've done a good job in terms of reforming A.M.T., but you still haven't answered the question ‘How in the hell do you intend to pay for it?'" So if I say, "from within the code," then your next question would be, "Then you're not excluding the possible increases in the rates for the higher incomes?" No! No, I'm not excluding anything.

We hope to have a code that will relieve tax liability for 90 million people. If the whole idea is that people know what to do with their money better than government, and if President Bush believes that his tax cuts were so successful because the taxpayer had the wisdom that government doesn't have ... then my present contention is that the middle class is just as smart as higher-income people. Therefore if you enlarge the family deductions, broaden the earned income tax credit, and expand the child credit, get rid of the A.M.T., then you have the same tax cut, except one would be for less than a million people, the other would be for 90 million people.

L.G.: As we sit here now, are you unwilling to say that you're for raising the upper rate?

C.R.: I don't like talking that way.

L.G.: Most people think you are. Most people think most Democrats in Congress are.

C.R.:  You know, I can see how you can reach that conclusion. But I never would think about giving any reporter a quote from me that says "Rangel says he's going to raise the tax rates for the rich." I would never say that. I'm saying that what scares the hell out of so many people, especially those that are in hedge funds, is that I want to be able to say at the end of the day that it's a fair and equitable system that has the confidence of the taxpayers. And they say, "He's coming after us. Goddamn it, that's what Rangel meant!"
 
L.G.: Back in June, on the day that you and Representative Sander Levin [Democrat from Michigan] talked about raising the rates on private equity and hedge fund managers [from the 15-percent capital-gains rate to the 35-percent ordinary income rate], the Dow Jones fell more than 185 points. Now that you're chairman, are you very sensitive that your words have a big market impact?

C.R.: That's one of the reasons why you find it very difficult for me to answer your rifle-shot question. I cannot be more honest. I would have to say, "Hey, I told you when you visited with me, I wanted to be fair and equitable." But I did not say that I could do all of the things that I want for the middle class without taking a look at all of the rates. I've had a Republican agreement to raise billions of dollars in "loophole closings," but you and I know that every "loophole" that's closed is an increase in taxes for someone.

What I have said is that the one thing that Republicans and Democrats agree on the committee is that the Alternative Minimum Tax is obscene, it shouldn't be there, it's immoral, and we should do something about it.
 
L.G.: But in the past, you have voted for various iterations of the Alternative Minimum Tax. And there was a vote in 1999 to repeal it, and you voted to keep it.

C.R.: I guess whenever you do that, you have to find out how you're paying for it and all those other things. And so, you know, when I wasn't chairman, I wasn't thinking like a chairman.

L.G.: That's what I'm getting at.

C.R.: Let me tell you, a lot of my votes have been adjusted because I'm the chairman, because my job is not to just prove to my constituents how I vote as the "Harlem congressman," it's to prove to the leadership of the Democratic Party what our policy is as Democrats in order to persuade the Republicans and the American people that we have the right policy.

L.G.: Is there a lesson here? When the Alternative Minimum Tax was enacted in 1969, two years before you arrived in the House, the idea was that really rich people—

C.R.: One hundred fifty of them!

L.G.: —that's right, were paying no tax whatsoever, so it was something to address.

C.R.: It was an admission that the tax system was screwed up. The way that I remember it, there were 150 people who damn near thought that the government owed them money because of all the deductions and the credits.

 

L.G.: Sure, but now, obviously, if it's not repealed, in this tax year it's supposed to affect 27 million taxpayers. And what I'm wondering is, what's the lesson of the "law of unintended consequences" in all of this?

C.R.: Oh, come on, I don't give a damn what we did in 1969! I want to know what to do to correct it. With as complicated a tax code as we've got, we're lucky if we get 90 percent of it right. Our ability to recognize where we had it wrong and to amend and to change, you know, that's what we're here for. That's why we have hearings—not because we know everything we should know [but to figure out] what would be the unintended consequences as opposed to what we want to achieve. And so I cannot think of any minor change to the code, much less one this big, that's not going to have unintended consequences.

L.G: Do you think you can enact any of these sorts of reforms if it involves hypothetically raising the top tax rate, raising other tax rates, while Bush is in office?

C.R.: Why can't you use my language?

L.G.: [Laughs] Because you're the chairman and I'm not!

C.R.: Let me tell you, if you were to agree with me that it would be good for the code and the country to close every loophole that we have in the code, you would agree, right?

L.G.: Mr. Chairman, these are hugely technical questions that I have no...

C.R.: Oh, that's crap. Let me tell you, so you would say, "Oh, sure, closing loopholes, you guys are going to do it? I think that would be good."

L.G.: You just pointed out that one man's loophole is another man's incentive.

C.R.: Exactly. Then my next question would've been, "What justification would you give in raising the taxes of every one of the people that's enjoying the loophole?" And so if I'm honest enough to tell you that rates have to be changed in order to accomplish the elimination of the Alternative Minimum Tax, no matter how you frame the question, some people are going to pay more taxes, and most people are going to pay less taxes. And you can ask the question all kinds of ways. "Who in the hell's going to pay more and who's going to pay less?" That's why we had the hearings. Those that would enjoy the elimination of Alternative Minimum Tax pay less, those that enjoy the expanded child-credit pay less, those who would have a larger family pay less, those that enjoy earning pay less. Well, who in the hell is going to pay more? Those who enjoy loopholes or what appear to be unfair advantages in terms of rates are going to pay more. Well, who are these people? That's why we have the hearings. How much money are you going to raise? As much as it takes to have equitable tax cuts, and A.M.T. is one of the major needs for revenues, period.

You come in with a cockamamie question about the economy booming, people are getting more money. I say they're busting their ass every day. They don't know it's booming. They're paying high dollars for babysitters, they're struggling, they're trying to make their mortgage, and you say "But you're doing so well." But I'm the A.M.T. guy, remember me? "I'm a fireman, I'm a teacher, do you really think I'm doing well?" And I say, well, if I took all of you and enlarged the amount of disposable income, would you use it wisely? "You bet your ass I would use it wisely!" And I'm relying on the math that's involved, 90 million people receiving less tax liability. But can it backfire?
 
L.G.: That's my question.

C.R.: I have no clue, except those people on top would have to be far more powerful than I thought they were—and maybe they are.

L.G.: So with you it all starts with eliminating the A.M.T.?

C.R.: Yes.

L.G.: But do you think this can be enacted in a Bush administration where you don't have a veto-proof Congress?

C.R.: Well, I have kept the leadership of my party informed as we have put the pieces together in this tax-reform bill, and there's not a week, whether we're talking about the health-insurance or energy bill, that we don't talk about tax reform. So the real question is, how can I possibly get a bill like this on the agenda? Well, in order to do that, a couple of things have to happen. One, I have to be able to at least prove that I have the overwhelming support of the Democrats. Hopefully, I can prove that I have some Republican support. And, lastly, I have to tell the administration that we stand some type of a chance in the Senate, because I'm so close to the forest, I cannot see how—Bush or no Bush—people can turn down a tax cut for 90 million people when we talk about 800,000 that are the beneficiaries of the Bush tax cut. And I go around and I ask people on the floor.

L.G.: Where are you getting the 800,000 figure?

C.R.: From the Bush tax cuts. The beneficiaries of the Bush tax cuts is probably less than a million.

L.G.: Less than a million taxpayers?

C.R.: Yeah.

L.G.: I just want to know where I should go for my proper information—presumably not the Wall Street Journal editorials.

C.R.: I don't care what number you come up with, it ain't going to be 90 million! And I don't go to those people that may have a rate increase—I don't know them. They don't come to see me. They don't like me! They don't say, "Please don't change the rates!"

L.G.: Well, I bet they do now.

C.R.: No, no, no! You'd be surprised about those who receive the benefits of the reduced tax rates. We hear more from the administration in terms of what they're doing to improve the economy than we hear from them. I mean, this is different if you talk about hedge fund operators or something like that. But no, as it relates to ordinary income rates, no. But corporate rates? Because we hear something from [Treasury Secretary Henry] Paulson about reducing them and closing corporate loopholes.

We expect to have a caucus of the Democrats and Republicans with Mr. Paulson, we're wide open to any ideas he would have, and you remember, he's talking about corporate tax increases. He wants to reduce the overall rates, and so I have to listen because they have to admit, if you reform in closing loopholes politically, you can be charged with increasing taxes. So if we can get the politics out of it and just deal with reform, there may be an area that the administration and committee may be able to work together.

L.G.: From your experience, can you ever get the politics out of this sort of situation?

C.R.: Don't say "in my experience," because on each and every day, things change. We have a lame-duck, unpopular president; we have one third of our Senate up for reelection; the entire House of Representatives is up for reelection; the president coupled with a lot of embarrassing situations with the Republican Party; and we have the war. If it was perceived politically that we have a 90-million-people tax cut out there, the politics of that, I'd like to believe, would fall on our side. It would seem to be that's the politics I want, rather than the politics of "are you against the Bush tax cuts?"

L.G.: What's your relationship with Paulson? Do you talk to him a bit?

C.R.: Yes.

L.G.: How often do you speak with him?

C.R.: Every week.

L.G.: Do you have breakfast with him?

C.R.: Lunch.

L.G.: Do you like him?

C.R.: Yes.

L.G.: Why?

C.R.: Because he likes me. [Laughs]

 

L.G.: Well, he's bound to like the chairman of the Ways and Means Committee.

C.R.: I like a fellow New Yorker that's a straight shooter, who doesn't waste a lot of time. I don't know whether he said it or I said it, but we both say it: Saying it over and over is not going to change anything. We learned that early in our conversation, no matter how strongly we feel, saying it over and over is a waste of time and energy. Even if we're not able to do as much business as we would like, it saves us both a lot of time.

L.G.: How often do you speak with the president?

C.R.: Hardly ever. Speaking with him doesn't help me with my legislative agenda as much as it does with Paulson. Paulson would allow me to avoid the land mines. You haven't heard of private accounts since Paulson and I have been talking because he knows that this is one of the land mines that the president doesn't want to step on.

L.G.: It seems like they immolated themselves on that last year.

C.R.: Well, the president wanted to come back again with it this year; there were some rumblings about the private accounts. But I would gather that somewhere Paulson says, "If you want it, deal with Social Security, Mr. President. Don't get these people all excited about what happened last year in private accounts. Just let me see whether there's a time and place for this to be raised in a different type of atmosphere and you'll see what happens." I'm not saying that did happen, but it would make a lot of sense. I think he has really been a great referee, Paulson. I've never used that term before, but he's kept us from getting into clinches.

L.G.: Would you call him an honest broker? Is that another way of putting it?

C.R.: I would, but there's very little to broker, except on trade. But the few issues that we had to work with, he's been very forthcoming.

L.G.: You've been attempting to be helpful to them in trade policy.

C.R.: We've got a long way to go. I have a great working relationship with Paulson and a little less than with U.S.T.R. [U.S. Trade Representative Susan Schwab], but we do have the same objectives to get [agreements with] Peru and Panama out of the way so that we can look at Korea and Colombia.

L.G.: That's put you in kind of an odd position where a lot of the labor unions that have traditionally been your supporters are a little upset. They're looking carefully at what you're doing, and they're probably telling you that they don't like certain things.

C.R.: That's true, but what I have found is that the administration and the multinationals have really not done a good job in talking about the advantages of trade. They haven't done a good job in protecting American businesses and American jobs. They've just said "trade is good," and we have communities all over the country that have lost a lot of plants. A lot of people, and the kids even, some can't afford to get college educations. So part of our trade policy has been for me talking with the Business Roundtable and the Business Council and the Chamber of Commerce, and saying, "If you want to give your support for trade, you first have to give trade a good name...

But you know things we can do; you've got all these universities, you've got all these talented people. We're bringing in people from India [and telling them] hey, in the next five or 10 years, you can be our brains. We need you in the multinational corporations. And not only that, but we're prepared—the same money that we're prepared to spend to bring these people over here, we're prepared to spend what the federal government does to give you an education. All these ideas, we are developing so that people don't have to campaign against trade. They may campaign against a bill because it's going to be devastating for their region. Those from Michigan may be campaigning against the Korean bill because they have 700,000 cars here, we've got 5,000 over there, and so that won't change them in Detroit, but maybe because of beef and because of services, the rest of the country may say, hey, trade isn't bad for me. And so, when unions come and say they're against trade, to a large extent, they mean trade policy as we know it. And the fact that I'm saying, I'm not asking you to vote for any trade bill, I'm just saying any trade bill that has these principles in it, it should be easier for you to look at the bill objectively rather than being against trade. So I'm hoping that the multinationals will pay just as much attention to us and the impact of trade negatively as they do in developing new sources of trade.

 

 
L.G.: How's your relationship with your old House colleague Dick Cheney? You've had words with him in public.

C.R.: I think he just does this to get his name in the newspapers. [Laughs] I know I do. If we sat next to each other, which we have, I don't think that we could think of anything unkind to say about each other—unless there was a reporter there. And certainly not if there were no TV cameras there.

L.G.: He said you were losing it, and you said he was mean and nasty.

C.R.: I forgot what I said. The guy that runs around shooting friends with a gun. He has enough problems without me piling on. But we have never had an unpleasant thing to say close up.

L.G.: So it's just two political warriors sort of fighting it out on the field of battle and having a little fun?

C.R.: Exactly. I don't think his wife finds it too funny, though.

L.G.: So, you just turned 77. And it was widely assumed that had the Democrats not won the majority back and you didn't become chairman, then this would've been it for you.

C.R.: It would've been.

L.G.: But how do you feel about staying around?

C.R.: I can't give you an honest answer, because I've had such a great ride and made such contributions that I'm proud of, and my community has been so good to me, I don't remember the last time I got less than 90 percent of the vote. I've been there for 38 years. I succeeded a guy, the late and great Adam Clayton Powell, who was there for 26 years. What more can you ask of a community? And the reason I'd have left has very little to do with becoming chairman or not. It has a lot to do with the war. I just would find it difficult to tell my kids and grandkids, "Why do I continue to run and be in the minority and can't explain what the hell I'm doing to stop the war?" And as long as you're in the minority, you don't have a damn thing to say about it. You're just showing up for an attendance call, that's all. And that's changed now.

We do have the agenda, and the progress I hoped that would've been made, hey, a veto doesn't allow all of that to happen. But I'm satisfied that expanding child care, getting rules of ethics, making certain that we have timetables to get the hell out of Iraq. I'm satisfied that in the next few years I would be able to say, "Okay, I was chairman for two years, and now maybe at the age of 78, we can take another look at life." And then what happens? I'll wake up and someone says, "You know Hillary's gonna be president," and I said, "Oh hell, I'll be there for at least two more years for that." And so it's almost like an addict.

L.G.: She's "your girl."

C.R.: She's a wonderful, experienced lady, I'm so pleased that we know and are fond of each other.

L.G.: She credited you for pushing her into the Senate race.

C.R.: I know, and I dated my wife for seven years before I proposed, and I still think that was my idea, too.

L.G.: Obviously Senator Clinton voted to authorize the war.

C.R.: That is a painful vote for me, and it was so painful when John Kerry got annoyed with me when I shared with him how important that vote was to me. And I have to admit that voting against the president, while politically was an easy thing for me to do, I was always haunted by maybe he knew more about weapons of mass destruction, maybe he knew more about Osama bin Laden's connection with the attack, maybe Saddam Hussein was involved, maybe we were open to a chemical attack.

L.G.: So you can see Hillary's point.

C.R.: No, no. What I can see is that we have so screwed up, no matter how one voted, that I am now prepared to concentrate on getting the hell on out.

L.G.: Are you satisfied with Hillary's position on this issue?

C.R.: No, but I'm satisfied with her position on getting the hell on out.

L.G.: So you have the appetite to continue with this if Hillary becomes president?

C.R.: I have the appetite that I cannot refuse when and if Hillary becomes president. And if that didn't happen, I would've had a full service.

L.G.: Do you think you'll need her or a Democratic president to get your tax reforms enacted?

C.R.: No, but I need her or a Democratic president to get the policies of war, economic development, health care, housing. I would need her or someone like her.

L.G.: Are you surprised that your old friend Rudy Giuliani is doing so well?

C.R.: I am so surprised, I don't know what to do. I don't want to say anything that would cause him not to be the Republican presidential nominee, but it amazes me how people from outside of New York see somebody that those of us in New York have never known.

L.G.: What do you think is driving that?

C.R.: The war, the war, the war. Just as people came to the president's defense in 9/11, the fact is, the president wasn't here, Rudolph Giuliani was. So nationally, what face did they see? They didn't see President Bush, they saw Rudy Giuliani marching up and down, waving and whatnot. That's what America needed. We were frightened as hell and he was there, and that's good.

L.G.: Were you surprised that he has been apparently such a proficient and talented candidate thus far?

C.R.: I don't really think he's that good. I think he's that good compared to the rest of them, but really I think it's a weak bench they got out there. I think it's really sad, when I listen to Huckabee and Romney—who really had the same record as Senator Kerry, you know.

L.G.: So you think that Hillary, if she were the nominee, could eat Rudy's lunch?

C.R.: No, no, no. I think Hillary will be the nominee that would eat anybody's lunch.