The Truth Needle | Mostly false: Reichert tax vote portrayed unfairly

The claim: A television ad from Democrat Suzan DelBene's congressional campaign claims that Republican U.S. Rep. Dave Reichert voted to raise taxes after promising never to do so.

What we found: The claim is based on a vote Reichert, who represents the 8th Congressional District, cast on legislation in December dealing with tax credits.

In the ad, DelBene charges that Reichert "promised he'd never raise taxes and then turned around and voted for $31 billion in higher taxes on families and small businesses."

Like many political ads, it leaves out key facts and is misleading. We find it's mostly false.

The ad involves a bill that contained both tax cuts — in the form of tax credits — and tax increases.

The bill, which passed the House 241-181 but has not passed the Senate, would have continued $31 billion in various tax credits for individuals and businesses.

DelBene's campaign maintains that Reichert's vote against the bill is the same as raising taxes, since the individuals and businesses would not get the breaks if the bill failed.

The tax incentives, which must be renewed each year, included a teacher tax credit for out-of-pocket expenses on classroom supplies, credits for businesses that invest in research and development, and credits for alternative fuels, vehicles and environmental cleanup. It also included extension of the sales-tax deduction on federal income taxes.

To help offset the cost of the tax credits, the House bill would have raised $24 billion by more than doubling the tax rate on compensation collected by hedge-fund managers, private-equity firms and other investment partnerships — a tax increase Reichert said he couldn't support.

Many of these managers and firms take a percentage of investment gains earned by their funds as compensation. The bill would tax that money as ordinary income (as high as 35 percent) rather than capital gains (15 percent).

Supporters, who include many Democrats, say the change would eliminate a tax loophole hedge-fund managers have exploited. Opponents, who include many Republicans, contend that it would discourage investment by the fund managers and firms, and thwart job creation. Reichert also says the tax increase could negatively impact the state pension fund because it invests in private-equity funds targeted by the tax.

At the time of the vote last year, Reichert said he supported renewing the tax incentives but couldn't vote for the accompanying tax increase.

Rep. Adam Smith, a Democrat from Tacoma, also voted against the bill.

We're not prepared to dive into the debate over the merits of the tax credits or tax increases included in the bill.

But it's misleading to claim that Reichert voted for a tax increase when in fact he voted against a bill that would have continued tax breaks but also increased other taxes.

Nicole Tsong: 206-464-2150 or ntsong@seattletimes.com