Nothing turns off reasonable folks more than the discovery that someone they know is a hypocrite.
To refresh your lexicographical recall, hypocrisy is defined as a pretense of having a virtuous character, moral or religious beliefs or principles that one does not really possess -- in other words, a fraud -- especially when one's actions secretly run counter to one's preaching.
Sadly, Americans, with good reason, have come to expect a certain degree of hypocrisy from almost all politicians, (Ron Paul excepted).
The classic hypocrite was epitomized in Sinclair Lewis' 1927 novel Elmer Gantry, the story of an immoral con man who teams up with a woman evangelist in selling religion for profit to small-town Americans.
Thus it was that the resident left-wing talking head at MSNBC, the recently demoted Keith Olbermann, gleefully sneered that Republican vice presidential candidate, Gov. Sarah Palin of Alaska, "...is Elmer Gantry, Amy Semple McHockeymom."
Charlie's Exit Tax
So here comes good old boy, Charlie Rangel, Democrat congressman from Harlem, dean of the New York delegation, a 37-year veteran of the U.S. House of Representatives whose seniority and the Democrats 2006 victory has made him chairman of the powerful House Ways and Means Committee that writes all of America's tax laws.
I served in the House some years ago with Charlie and found him, in spite of our philosophical differences, to be a genial gentlemen with a great sense of humor. But as one who has an interest in promoting low taxes and continuing the freedom to invest and do business offshore, I have come to know a different Charlie Rangel all too well.
For years Rangel has been a tireless advocate of a huge "exit tax" on any American citizen or long-time resident alien who decides they want formally to end their status, (as they have a legal right to do).
A 50% Capital Tax
Rangel tried and failed to get his onerous tax enacted into law in 2004 and 2005 when the Republicans controlled the Congress. Once the Democrats came to power after the 2006 elections, Rangel made certain his exit tax would become law. He slipped this horrendous tax into a popular military and veterans pension/pay bill, (without hearings or public notice) and on June 4, 2008, President Bush, not wanting to upset the veterans' lobby, signed it into law.
The Rangel exit tax presumes that anyone who ends his or her U.S. citizenship and; (1) who paid more than $124,000 in net taxes for the previous five years, or (2) has a net worth of more than $2 million, is a tax traitor who did so with the intent to avoid paying taxes. No proof of intent is required. With some variations, the tax is about 50% of the value of all the expatriate's assets wherever located.
Needless to say, over the years Rep. Rangel argued for his exit tax, excoriating "the rich" who might avoid U.S. taxes offshore as the worst possible ingrates and villains. Rich Americans have a special obligation, he intoned, to pay their fair share of taxes so that poorer Americans don't get stuck with paying the tax bill. He railed against offshore "tax havens" where rich Americans, he claimed, hid their cash and failed to pay taxes.
Charlie's Offshore Haven
In July, The New York Times disclosed that the New York developer, the Olnick Organization, had allowed Rep. Rangel to lease four rent-stabilized apartments in a luxury Harlem condo high-rise at prices far below market value.
He used one as a campaign office, which violated New York state requirements that rent-stabilized apartments be used solely as a primary residence. Rep. Rangel agreed to relinquish the campaign office, but he asserted that there was nothing improper about keeping the others, and pointed out that two of the units were combined by a previous tenant who had a wall removed.
While it is not illegal for landlords to allow a tenant to lease multiple rent-stabilized apartments, some government ethics experts said that the hundreds of thousands of dollars in rent savings Mr. Rangel received could be considered a gift and a violation of the $100 annual limit on gifts to House members.
Pero Espera: Hay Mucho Más!
It turns out that Exit Tax Charlie also has had, since way back in 1988, his own offshore tax haven down on Tortuga Bay in the sunny Dominican Republic.
Rep. Rangel has owned a luxury beach front house at the posh Punta Cana Resort and Club. But the Congress' head tax lawmaker, the man in charge of the Internal Revenue Code, has never reported to the IRS or paid any taxes on over $75,000 in rental income his beach front house has earned him. He also failed to list that income on his New York tax returns. He also got a $54,000 mortgage loan on his villa interest free, a happy fact of which he claimed to be unaware. He paid it off in 2003. It was also revealed Rangel had failed to pay taxes or disclose the sale of a home he and his wife owned in Washington, D.C. in 2003 and a $70,000 profit they made on a Florida condominium they bought in 2004 and sold in 2006.
Deferred Taxes a Specialty
In the past Rep. Rangel has been a fierce advocate of repealing the current legal deferral of income taxes on offshore hedge fund managers. He said he wanted to shut a tax loophole allowing some hedge fund managers to defer taxes on billions of dollars of their compensation from offshore funds. The provision would require fund managers to pay taxes immediately on income that is now tax deferred.
But until now we really didn't know what an expert Charlie was on how personally to defer taxes. You just don't pay them!
Ne Habla Espanol?
At a Capitol Hill press conference during which he took turns being remorseful and defiant, the congressman said he was not aware of the unreported income and unpaid taxes, in part because he had trouble getting detailed financial statements from the resort’s managers in the Dominican Republic.
"Every time I thought I was getting somewhere, they’d start speaking Spanish," Rangel told reporters. This, from an experienced lawyer who has many bilingual staff members and represents a district with over 40% Spanish speakers.
Republicans in the House have reacted with calls for Chairman Rangel to resigned his chairmanship. But the 78-year-old congressman, who has been in the House since 1971, brushed aside calls that he step down as chairman of the House Ways and Means Committee, which writes the federal tax code. He accused Republicans of politicizing his financial issues. He said he would pay several thousand dollars in federal taxes he owes after failing to report $75,000 in rental income from the villa.
Meanwhile, House Speaker Nancy Pelosi (D-CA), has referred the entire Rangel matter to the House Ethics Committee.
Don't hold your breath.
Knowing the ways of Capitol Hill as I do, I seriously doubt that this will mean an exit for "Exit Tax Charlie."
* Find out how you can take advantage of the Dominican Republic's fast-track residence for foreigners in my latest version of
The Passport Book, or explore legal tax-saving possibilities offshore in one of my best-selling books,
Where to Stash Your Cash Legally: Tax Havens of the World.