WASHINGTON – One of the most vociferous congressional critics of President Bush’s so-called tax cuts for the rich, Rep. Charles Rangel, is also one of the House’s most “vigorous” advocates of restoring a tax loophole that allowed multimillionaires to evade up to 90% of their personal federal income taxes, according to representatives of the U.S. Virgin Islands who lobbied Congress yesterday to reopen the loophole.

“It’s not fair what they’re doing here,” Mr. Rangel said of Washington’s efforts to impose stricter residency requirements for filing taxes as a Virgin Islands resident, while denying that his interest in the matter was influenced by tens of thousands of dollars donated by Virgin Islanders to the Harlem Democrat’s recent re-election campaigns.

As The New York Sun reported in front-page stories in 2003, tax breaks offered by the Virgin Islands’s Economic Development Commission – a program designed to spur investment in the territory with tax incentives for individuals and businesses – were taken up by some of America’s top money managers, including Richard Driehaus and Jeffrey Epstein, who keep high profiles in Chicago and New York but declare the USVI as their place of residence for tax purposes. The loophole allowed some wealthy Americans to dodge almost 90% of their federal income tax bills.

In the October 2004 American Jobs Creation Act, Congress moved to curb the abuse by stepping up the residency and income eligibility requirements for the tax breaks. In January, the Treasury Department codified the residency requirement by stipulating that individuals must spend at least 183 days a year in the USVI to be considered residents for tax purposes.

Testimony yesterday before a hearing of the Senate’s Energy Committee by the Islands’ governor, Charles Turnbull, and their congressional delegate, Rep. Donna Christensen, is part of an “ongoing effort that we have engaged in over the last few months” to get Congress and the Treasury to scale back the new residency restrictions to 122 days over three years, Mr. Turnbull told the Sun.

The Virgin Islands, the governor and his associates said, have been working closely with members of the Senate – primarily Senator Crapo, a Republican of Idaho, who sits on the Energy Committee; the Senate Finance and Energy committees’ Senator Gordon Smith, a Republican of Oregon; Senator Thomas, a Republican of Wyoming, who also sits on both the Finance and Energy committees; and the Energy Committee’s Senator Talent, a Republican of Missouri.

Yet while most of the Islands’ Senate backers are pro-free-market Republicans, the territory’s champion in the House is one of the body’s most left leaning Democrats: Mr. Rangel.

“Charlie Rangel has been a vigorous, strong advocate,” a Washington-based lawyer representing the USVI in their lobbying efforts, Peter Hiebert, told the Sun. “He’s been very active on our behalf.”

The dean of New York’s congressional delegation said yesterday that his involvement in the EDC battle was a continuation of his general interest in the Caribbean, and a desire to remedy an injustice against the people of the Virgin Islands.

“I think it’s really hypocritical for the people in the Virgin Islands and Puerto Rico to be treated as citizens only when it’s time to go to war,” Mr. Rangel said. “And then when it’s time to provide for their economy, and their health care system, to treat them worse than we treat the people of Baghdad. Whether or not you call it a colony, it’s really not a full American status.”

Mr. Rangel said he preferred direct federal subsidies, but, failing that, thought the federal government should lift the 2004 restrictions.

USVI representatives argued yesterday the increased restrictions on tax incentives imperiled the lucrative EDC program, which provided around one-fifth of the territory’s revenue.

Although Mr. Rangel has long denounced Mr. Bush’s tax cuts as sparing the wealthiest Americans from their tax burden at the expense of the nation’s poor, the congressman yesterday maintained his support for allowing millionaires to dodge almost all of their federal tax bills through the EDC program.

“They’re two separate things,” Mr. Rangel said. “If you are evading taxes, you should be indicted. If you are avoiding taxes, that is legal,” he added.

Since 1998, 37 Virgin Islands taxpayers have ponied up a combined total of $38,700 for Mr. Rangel’s re-election fund, according to Federal Election Commission filings. Donors include retirees, realtors, investors, bankers, attorneys, and prominent local entrepreneurs, including representatives of the AH Riise duty-free chain and Virgin Islands Rum Industries.

Mr. Rangel said the donations, some of which came from fund-raisers held in the Virgin Islands, had not inspired his activism on the EDC matter.