Tax reform drive threatens deductions and charity

Excerpted from "Taming the tax code beast," Washington Post column by George F. Will, August 09, 2013 - “Colleagues,” said the June 27 letter to 98 U.S. senators, “now it is your turn.” The letter’s authors are Max Baucus (D-Mont.) and Orrin Hatch (R-Utah), the chairman and ranking Republican, respectively, on the tax-writing Finance Committee. From their combined 71 years on Capitol Hill they know that their colleagues will tiptoe gingerly, if at all, onto the hazardous terrain of tax reform.

Together with Chairman Dave Camp (R-Mich.) of the House Ways and Means Committee, Baucus and Hatch propose a “blank slate” approach, erasing all deductions and credits — currently worth more than $1 trillion a year — and requiring legislators to justify reviving them. Hence the Baucus-Hatch letter, in response to which almost 70 senators sent more than 1,000 pages of suggestions. Although some often were short on specificity, the submissions were given encrypted identification numbers and locked in a safe, as befits dangerous documents.

Baucus still hopes to bring Congress to an “all join hands and jump together” moment, “a tipping point where there is a sense of inevitability.”

Commentary

CMA VP for Govt. Relations Jonathan Imbody: In his column, George Will neglects to note that when Committee leaders put every tax deduction on the table, they opened the door to misdirected assaults on charity. I have been meeting on the Hill this month with U.S. senators (Thune, Hatch and Wyden) and staff on the Senate Finance Committee and the powerful House Ways and Means Committee to convince them not to tax money that people give away to charities. Doing so only transfers money from the hands of citizens and cost-effective charities to the government--and we know how well that works.

Faith-based organizations would get hit hardest under any of the current schemes secretly floated by Members of Congress. Cutting the charitable gift tax deduction would decrease giving and cut an estimated $140 billion in charitable services to needy Americans. Since the government would have to take up the cost for lost social services, any tax revenue gained from cutting deductions would be more than lost to new program costs. The result would be a deeper deficit, bigger government and less efficient and effective care.

Yet the prospect of targeting the charitable gift tax deduction has become alarmingly clear in my meetings with senators and staff. One of the most insidious cuts under consideration would eliminate deductions for gifts to charities such as universities, the arts and churches, which in the opinion of some do not provide sufficient tangible services to be deemed a "public benefit."

The 100-year-old tax deduction for gifts given "exclusively for religious, charitable, scientific or educational purposes" enforces the First Amendment's proscription against government infringement of the free exercise of religion. Imagine the IRS determining which churches and faith-based charities merit approval for tax deductions. Congress should take aim at real tax reform while protecting charity and those who depend on it. Charity is not a loophole; it's a lifeline.

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