Edward A. Zelinsky is the Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University. He is the author of The Origins of the Ownership Society: How The Defined Contribution Paradigm Changed America. In this article, Zelinsky discusses the failure of House Ways and Means Chairman Charles B. Rangel to report on his federal income tax return Rangel’s rental income from his condominium in the Dominican Republic. Zelinsky contrasts that failure with the ethical standards established by Rangel’s legendary predecessor as Ways and Means Chairman, Wilbur Mills. Check out Zelinsky’s previous articles here.
For most Americans, there is a run-of-the-mill quality to reports that Congressman Charles B. Rangel of New York failed to report for federal tax purposes the income from his condominium in the Dominican Republic. Congressman Rangel, as Chairman of the House Ways and Means Committee, is the nation’s chief legislative tax writer. Predictably, Republicans have decried Congressman Rangel’s failure to comply with the tax law. Democrats, with equal predictability, have treated Representative Rangel’s problem as a nonevent.
For members of the tax community, however, Congressman Rangel’s troubles evoke a more profound specter, the ghost of Wilbur Mills.
For almost two decades, Mills was the legendary Chairman of the House Way and Means Committee. Like all legends, underneath this one was a flesh-and-blood human: Mills’s career terminated abruptly as a result of his ignominious relationship with Fanne Foxe. Fanne, “the Argentine Firecracker,” was the Ashley Dupre of the mid-1970s. Moreover, in no small measure, the contemporary financial problems of the federal Social Security system are attributable to the cost-of-living formula which Mills crafted to support his quixotic run for the presidency in 1972.
However, the positive side of Mills’s ledger far outweighs these negatives. Mills was the gold standard of a legislator, and our tax system is better for it. Mills mastered the details of the Internal Revenue Code as few, if any, other legislators have done in our nation’s history. Mills had a genuine concern about the quality of tax policy.
Moreover, Mills was not just concerned with the integrity of the tax law. He was equally sensitive to his ethical position as the nation’s chief tax writer. Mills famously prepared his own tax returns and took the standard deduction. He thought it unseemly for the Chairman of the House Ways and Means Committee to take the higher, legal deductions to which he was entitled.
Congressman Rangel blames his failure to report his full income on his accountant and wife as well as the operators of the condominium who provided little data. It is inconceivable that Wilbur Mills would have mounted such a defense. Indeed, it is inconceivable that Wilbur Mills would have made such a mistake.
The principles involved are basic to our tax system: U.S. citizens must report their worldwide incomes. Rents are income.
For the integrity of the tax system, Congressman Rangel’s problems could not have come at a worse time. While we do not know the precise number of U.S. citizens failing to report their off-shore incomes, the problem is serious. In such an environment, the failure of the Ways and Means Chairman, however inadvertently, to report off-shore income is, at best, troubling.
What should Congressman Rangel do? First, he should fess up. It will not do for the nation’s chief tax writer to blame the inaccuracy of his federal tax returns on his accountant, his spouse and his business partners. He should state, simply and publicly, that he failed the Mills standard.
Going forward, Congressman Rangel should announce that he will assume personal responsibility for his tax returns and will engage whatever professional assistance he needs to help him prepare those returns accurately. Finally, Congressman Rangel should extract something positive from this episode by announcing that the federal income tax returns of all members of the Ways and Means Committee (including the Chairman) will automatically be audited annually.
Wilbur Mills would have done nothing less.