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So Long, Charlie

Last week, the ethically challenged Rep. Charles Rangel, D-N.Y., asked Speaker Nancy Pelosi for a temporary leave of absence from his position as chairman of the House Ways and Means Committee until the ethics committee finishes its investigation of him.

Given the number of Rangel’s alleged missteps, that could be awhile.

The former chairman, who led the committee responsible for writing all of the nation's tax laws, faces accusations regarding his fund-raising, his failure to pay federal taxes on rental income from a villa he owns in the Dominican Republic and his use of four rent-stabilized apartments provided by a Manhattan real estate developer. The House ethics committee already has admonished Rangel for accepting corporate-sponsored trips to the Caribbean in 2007 and 2008.

Rangel gave up one of the New York apartments, which he was illegally using as a campaign office. And, after initially denying that he had omitted any income from his rental property on his federal tax returns, the congressman eventually admitted that he had failed to report approximately $75,000 in income from the property. At least he had a good excuse. “Every time I thought I was getting somewhere, they’d start speaking Spanish,” he explained. He also blamed his wife, saying she was supposed to have been managing the property.

But the man who claimed to have five different primary residences simultaneously (in addition to the four New York apartments, he claimed a homestead tax exemption for a house in Washington, D.C. from 1995 to 2000) has never been shy about saying other people should pay more in taxes. When he proposed paying for healthcare reforms with a 5.4-percentage point income tax surcharge on those earning more than $1 million, he called it “the moral thing to do.”

Hypocrisy is never a good thing, but it’s particularly bad when it comes from someone with substantial power over the nation’s tax code. While the government has the power to punish tax evaders, most people never get audited, making the system ultimately reliant on the willingness of Americans to voluntarily pay what the law demands. When those at the top sidestep their duties, they threaten the integrity of the entire system.

Rangel has insisted that his step away from power is only temporary. When asked whether he would still run for reelection in his upper Manhattan district, Rangel told reporters that there was “no way that I can foresee anything” that would stop him from running.

In spite of the congressman’s assurances, I believe it is unlikely that he will ever wield a committee gavel again. Few in Congress are likely to stand beside the unpopular former chairman if he attempts to resume his perch. In any case, Rangel will turn 80 in July, and he may well discover a reason not to run again. Just the night before he handed in his resignation, he declared that he had no intention of stepping aside.

Rangel will be replaced by Rep. Sander M. Levin, a liberal Michigan Democrat. By seniority, Levin was second in line for the post, but the more senior Rep. Pete Stark, D-Calif., has his own history with the ethics committee. Stark asked that his name be withdrawn from consideration and applauded Levin’s appointment. “It’s the best thing for the country, the Congress and the committee under the circumstances,” Stark said.

I don’t think I am going to like Levin’s ideas on tax policy any better than I liked Rangel’s, but that is beside the point. Rangel’s presence was a threat to the tax system itself. If you want to see what happens to a country whose citizens are cavalier about paying taxes, take a look at Greece. The farther Rangel is kept from power, the better.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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