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Democrats Must Break With Rangel

A Commentary by Froma Harrop

Tuesday, December 09, 2008

Company gives $100,000 to congressman's pet cause. Congressman protects company tax loophole worth tens of millions. Bam! Company gives pet cause another $100,000 check.

Sounds like old times in the Republican Congress of former House Majority Leader Tom DeLay. But this is happening in the Democratic Congress of House Speaker Nancy Pelosi. What a way to greet the new dawn of the Obama era.

The congressman is Charles B. Rangel, chairman of the House Ways and Means Committee. The cause is the future Charles B. Rangel School of Public Service at the City University of New York. And the company is Nabors Industries, an oil driller that has pledged a total of $1 million to the school.

There was nothing subtle here. Nabors CEO Eugene Isenberg reportedly met with Rangel the day the Harlem Democrat's committee marked up the bill of interest. Shortly after the tax shelter was secured, the second check cleared. (Cynics will be happy to learn that there's also an Isenberg School of Management at the University of Massachusetts, named in the executive's honor.)

And what useful economic activity did Nabors perform to justify this princely tax break? Opening an office in Bermuda and declaring itself foreign.

The loophole will cost the Treasury $1.1 billion in revenues over a decade. This is money that could have gone toward expanded health coverage, restoring the National Parks or whatever.

The brisk Democratic trade in tax fixes has not been limited to Rangel. New York Sen. Charles Schumer had reassured private-equity fund managers -- while raising campaign cash from them -- that Democrats would not soon alter the absurd loophole that let them pay a low 15 percent capital gains tax rate on their enormous profits.

While unsavory, the tax deal for Wall Street hotshots isn't illegal. But Rangel's exchange of tax favors for donations to the school, if true, would go galloping over the line. Meanwhile, new stories of questionable conduct keep gushing forth.

For example, the congressman failed to report $75,000 in rental income on a luxury villa he owns in the Dominican Republic. Rangel offered the incredible excuse that he didn't know he had to tell the IRS about the rental money. Even goofier, he contends that his inability to speak Spanish contributed to the oversight.

Another irregularity centers on his control of four rent-stabilized apartments in New York. Under New York law, a rent-stabilized apartment has to be a primary residence -- therefore, only one to a customer.

Back at the Nabors controversy, Rangel insists that the company's largesse to the Rangel School and the preservation of its tax loophole were pure coincidence. By the way, he had been using official House stationery to solicit donations from other business leaders. That, too, is a no-no.

Last month, House Democrats re-elected Rangel as Ways and Means chairman -- to repeat, as keeper of the federal tax code. Pelosi has staunchly defended him, pending a House ethics committee report on his various doings. Wrong attitude.

We know that Charlie Rangel is a founder of the Congressional Black Caucus. He's charming and witty and fought valiantly in the Korean War. There's much to admire in the man.

But Pelosi and company can't wish away the accumulating evidence of blatant self-dealing. They should yank the gavel out of Rangel's hand until he gets an all-clear signal on ethics, something that looks increasingly unlikely.

Democrats will soon hold the White House and majorities in both Houses of Congress. This is the opportunity of a generation to show their stuff, but one Democrats will blow if they don't enforce ethical discipline right now.

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