Tax panel feels tighter Pelosi grip

With the economic crisis creating a political emergency for Democrats, House Speaker Nancy Pelosi (D-Calif.) has taken firmer control of tax policies, while the grip of her main tax-writer has been weakened.

As Ways and Means Committee Chairman Charles Rangel (D-N.Y.) continues to fend off questions on ethics allegations, Pelosi this year has played a more prominent role in making changes to the nation’s tax system.

{mosads}Pelosi appeared to recognize quickly that she was facing a major political problem with the AIG bonus scandal. Hours after it surfaced, Pelosi issued a press release on Sunday threatening legislative action. In another sign she realized the gravity of the AIG situation, Pelosi vowed to “demand answers from AIG” the following day.

Pelosi called a late-afternoon leadership meeting on Tuesday, and afterward sent out a press release saying she had “directed” Rangel and two other panel chairmen to find legislative ways to wrest the bonuses out of the hands of AIG executives.

Rangel did not initially embrace Pelosi’s idea to tax the bonuses at a high rate. He told reporters that such a move “is a venting type of thing.”

He added, “I would hope and assume we have alternatives to the tax codes … When you get angry you don’t think as clearly as when you calm down.

“It is tough [for] me to think of the tax code as a political weapon,” he added.

But after the meeting with Pelosi and other committee chairmen, Rangel was on board with a plan to tax the bonuses at 90 percent. The tax hammer would fall on any officials at companies receiving $5 billion or more in Troubled Asset Relief Program (TARP) funds who received more than $250,000 in salary and bonus combined on anything above that threshold they received. The bill easily passed the House on Thursday, with Rangel speaking forcefully for it during the debate.

Asked about his apparent change of heart, Rangel cited the great public outrage about the bonuses and the limited tools at Congress’s disposal to recoup the money.

But he also said Pelosi, as well as the economic crisis, convinced him to set aside his concerns about using the tax code to go after the bonuses.

“I am deeply concerned when people are comparing this crisis to the Great Depression,” Rangel added. “So we have to fight with everything we have against these people who did irreparable harm to the country and the economy … especially when the Speaker says we have to do something.”

Not all Ways and Means Committee Democrats are happy about the urgent push.

Rep. Jim McDermott (D-Wash.) said the idea to tax the bonuses got a “mixed” review at a Wednesday morning meeting of committee Democrats. He said Democratic leaders were overreacting just like President Bush and former Treasury Secretary Henry Paulson did last fall when demanding urgent action on the $700 billion bailout bill.

“I believe in regular order,” McDermott said. “There is nothing that can’t wait for a thorough vetting. When you’re swinging around your sword, a lot of unintended people can get cut.”

McDermott said he believed Rangel wasn’t too happy with the rush.

“Do you recognize a good solider when you see one?” he asked.

{mospagebreak}Rep. Sandy Levin (D-Mich.) was more circumspect about Rangel’s role.

On Wednesday afternoon, Levin trumpeted the tax solution but would not say whether Rangel supported it.

“You’re going to have to ask him that,” Levin said. “He is actively involved in discussions — actively.”

{mosads}Asked what he told Ways and Means panel members who were concerned about moving too quickly without holding hearings on the matter, Rangel smiled broadly.

“God be with you,” he said.

The AIG bonus brouhaha has given reporters and political opponents more ammunition to attack Rangel on the ethics front.

For example, CNBC reporters grilled Rangel on his ethics issues for about four minutes of a 10-minute interview of the Ways and Means chairman on Thursday.

Rangel has been under fire since the summer over multiple allegations, including reports that he did not pay taxes on rental income from a villa he owns in the Dominican Republic and that he used a rent-stabilized apartment in New York City for campaign purposes.

A separate article in The New York Times, which appeared in January, reported that Rangel solicited up to $10 million from AIG executives for an education center bearing his name at the City College of New York. He never received those funds, but a former AIG executive and one of its largest shareholders contributed $5 million to the center.

Rangel said he had not solicited anyone with business before his committee, but the Times dug up a letter asking for a change to tax law from AIG executives sent a month after Rangel met with them about donations to the center.

Rep. John Carter (R-Texas) on Tuesday night held up a blown-up, poster-sized version of the story on the House floor and assailed the lack of ethics committee action on the accusations against Rangel.

“That is an accusation made by the N.Y. Times, not by me, not by any member of this House,” Carter said. “That should be resolved … because [Rangel] is our No. 1 tax man and he’s going to be championing the president’s budget of $3.6 trillion, a number that almost defies imagination.”

Rangel’s ethics woes have caused headaches for Pelosi, who predicted that the ethics panel would wrap up work on the accusations by the end of the last year only to have to revise that statement after more damaging allegations appeared about Rangel.

After that dust-up, political observers were watching Rangel’s reaction when President Obama and Pelosi moved to quickly pass a stimulus bill without the normal procedure of holding hearings in committees with jurisdiction. Under normal procedure, Rangel would have vetted a bill with so many tax implications in his panel for weeks or months, but the economic crisis and Pelosi’s demand to act quickly forced him to fall in line and play a role where he could.

Rangel groused about it publicly, but rolled up his sleeves and pushed for key changes that wound up in the final version of the bill.

The New York lawmaker and his supporters argue he played an instrumental role in several of the stimulus bill’s tax provisions, including the housing credit, as well as the unemployment insurance component, trade adjustment assistance and several other significant portions of the measure.

Nadeam Elshami, spokesman for Pelosi, said, “Chairmen understand that during these economic emergencies, we have to go outside regular order. Chairman Rangel and others have expressed their preference for regular order, and the Speaker believes in regular [order] and will work with chairmen to move the agenda forward.”