The chairman speaks: one of the most powerful men in Washington, House Ways & Means Chair Charles Rangel, shares his views on the economy, tax policy, and building wealth.

WHEN THE DEMOCRATS WON MAJORIties in the House and Senate in November's mid-term elections, Rep. Charles Rangel (D-N.Y.) became chairman of the House Ways & Means Committee, which oversees legislation and policies related to taxes, trade, health, and Social Security.

In conservative quarters, his appointment was viewed with fear and angst. Now, political and business leaders routinely seek the counsel and blessing of this 36-year political veteran. With a broad smile, Rangel, 76, publicly downplays his newfound power, asserting that "winning the majority is more important than just winning the chair." But his decisions affect the pocketbooks of legions of corporate leviathans, thousands of small businesses, and millions of citizens like you.

Operating out of his spacious office, from which he notoriously evicted Vice President Cheney, the raspy-voiced congressional leader was in the throes of yet another busy week. In the space of just a few days, Rangel presided over hearings on the economy, poverty, and globalization; reviewed renewal of the trade promotion authority, which gives President Bush the ability to negotiate trade agreements with other countries; discussed legislation proposed by the Senate that would boost the minimum wage to $7.25; and debated the Bush administration's budget, which seeks to permanently extend current tax cuts.

Among his most pressing initiatives is the repeal or limitation of the alternative minimum tax. Originally designed to guarantee that the wealthiest 3% didn't avoid income taxes by using a myriad of write-offs, the tax is expected to hit 30 million Americans--many in the middle class--by 2010, according to the Tax Foundation. As Rangel juggled these and other legislative priorities, SLACK ENTERPRISE spoke with him about how his committee will impact your finances.

BE: How has Ways & Means changed under your leadership?

RANGEL: Before the mid-term elections, Democrats had been excluded from participating in anything. If the Republicans thought an issue was going to be bipartisan, they would put in a poison pill to make certain that they got every Republican, at no matter what cost, so they did not need one Democrat In order to cut us out completely, they have had to hold their members hostage. It was so ridiculous. Already with my chairmanship, the Republicans, as badly as they wanted to be in the majority, are excited about the opportunity of legislating. And, as of now, I couldn't have a better working relationship with the senior Republican.

BE: Have you seen any benefits related to the Bush tax cuts?

RANGEL: Only about a million people have been beneficiaries of the president's tax cuts. Mostly, Congress will tell you that we have not been able to increase revenues to compensate for those cuts. The increase in revenues that we normally get as a result of tax breaks, we get because of increases in the economy. But the recipients of this tax cut have not done anything to stimulate the economic recovery.

BE: So the capital gains cuts did not stoke more investment and thereby have a positive effect on the economy?

RANGEL: There is no direct proof that this particular tax cut did that. If you borrow money in order to reduce the tax liability and you cannot show the relationship between the tax cut and the increase in revenues that you receive, then what you have done is given a one-time gift. And the president wants to make it a permanent gift to a group of people who have not indicated that this money they received was used for increased investment. As a matter of fact, no economists--well, unless you push them--show the relationship between expanded economy and the tax cut.

BE: In his new budget, President Bush is pushing to make permanent his tax cuts, currently set to expire in three years. If you're against the cuts, why wouldn't fighting their extension be part of your agenda?

RANGEL: I'm not concentrating on 2010. If I really want to take care of the alternative minimum tax, it's going to take me 10 years to do it. So naturally, I have to look to the future. The permanent cuts should only be part of the reform or the simplification of the tax code. If the president--or anyone--wants that, you've got to look at the whole code.

BE: Recently-enacted "pay-go" rules dictate that any measure to reduce taxes or boost spending must be offset by another initiative that raises revenues or cuts expenditures. How do these rules limit your ability to repeal the alternative minimum tax?

RANGEL: Pay-go applies to discretionary funding, and it just means that either you have to cut programs or raise the money to pay for them. The question would be, where do you find the money to take care of the alternative minimum tax? Politically, no one wants to come out of this saying that we increased people's taxes in order to take care of this problem. The way I think I want to handle this, since the Republicans agree that this is an unfair, unintended tax burden on the middle class that happened merely because of our failure to provide cost-of-living adjustments, is to take a look at the entire tax code, which is about $2 trillion a year or $20 trillion over 10 years. We have not looked at this since 1986. If we took the whole tax code and squeezed out every deduction, a lot of people would have forgotten why they were in the tax code in the first place--so many of them were put in for political purposes that no longer exist. I do believe that in the code, there is $350 billion that I can identify that is a gap between what is collected and what should be collected. If you just readjusted the rates for the upper middle class and for the alternative minimum tax, there should be enough funds to make the tax more equitable.

Be: African Americans continue to lag as stock market investors and homeowners. From your standpoint, what needs to be done for our community to build wealth on an individual and collective basis?

RANGEL: Education, education, education. After that, be able to have people show how you can save money by investing money and trying to cut down on the risk of investments. Let people see that paying rent is not the same as building equity. The whole homeownership program in the United States is a tax program-that is, the ability not to pay taxes and to deduct the interest from your liability.

BE: Beyond Social Security, what can be done to stimulate saving and investing for retirement? Do you support the concept of a universal 401(k)?

RANGEL: This nation is one of the poorest in terms of individual and national savings. Saving is contagious, but you have to encourage people to do it. Long-term interest is not as important as matching deposits up to a certain level and up to a certain income. We can have matching funds as an incentive for people to put more money in savings and have penalties for taking it out prematurely. It doesn't have to be on the 401(k) level, which is employer-sponsored. It could be the federal government going into partnership to encourage people to save. This is one of the things [former President Clinton's economic adviser Gene] Sperling had brought up. I just don't want to raise false hopes as to what we can accomplish knowing that next year is an election year. But that is certainly on our agenda in terms of pension benefits.

BE: What tax incentives will need to be put in place to stimulate investment in small- and minority-owned businesses?

RANGEL: My biggest problem all my life was that every time I went to get a loan, I couldn't get it because I didn't have any money to back up the loan. When people start small businesses, you're making an investment in them. So there should be a broader evaluation of a person's ability to succeed in business. The government should play a bigger role in encouraging the banks even if it does mean, to some degree, guarantees. I think the tax code is one way to get partners in the business. If somebody has the capital and wants to support an entrepreneur who has the skill, then show that person how they can save money on their income tax. There's an excellent opportunity where you can manipulate the tax structure on investments made in high-risk areas. You can greenline a district where people are encouraged to invest. This is even more important than the empowerment zones because you are talking about the accumulation of capital as opposed to job opportunities.

BE: So what will be your focus as the Democrats gear up for the 2008 presidential election?

RANGEL: If we don't get something done in terms of Social Security, tax simplification, major trade bills that are pending, or something in the health delivery system, the 2008 candidates could be out there talking about same-sex marriage or the war. We won't have a chance to capture the imagination of the American people.