Just one more reason why our tax code really does need to be restructured and made much more easy to understand and enforce. Is it now the idea of some to group all charitable organizations, along with donations to said, into one big pot? It would not be fair if one got more than another, kinda like pooling the tips at the end of the night and distributing to all waitstaff, not just to the people who actually received the tip that evening. Really, can all of this be sustainable? Are more rules, regulations, and taxes be the way to make a strong society?
The United States Senate Committee on Finance held a hearing on October 18 to consider the various proposals that have been made to alter the income tax treatment of charitable giving by individual donors, to ensure that such donations are encouraged in the most efficient way possible.
In its testimony, the Congressional Budget Office (CBO) pointed out that, under current law, taxpayers who itemize deductions may deduct the amount they donate to charities from their gross income within their tax returns. The Joint Committee on Taxation has estimated, at current levels of charitable giving, the total cost of that deduction - measured as the additional revenues that could be collected if the deduction was eliminated - at about USD230bn between 2010 and 2014.
The CBO looked at a number of proposals that have been made to alter the income tax treatment of charitable giving by individual donors. Some proposals aim to reduce the cost to the government by imposing a floor (or minimum level) that a person's charitable giving would have to exceed to qualify for preferential tax treatment.
Other proposals would extend the current charitable deduction to taxpayers who do not itemize deductions, or would replace the current deduction with a non-refundable tax credit, equal to, say, 25% of a taxpayer's charitable donations, with or without a floor.
Max Baucus (D - Montana), Chairman of the Finance Committee, discussed the need to guarantee that the tax treatment of charitable donations is fair and equitable, especially as people with different income levels tend to give to different types of charities. This, he said, results in the tax code giving large subsidies to some charities, such as health organizations, and smaller subsidies to churches and basic-need non-profits.
However, Orrin Hatch (R - Oregon), the Committee’s Ranking Member, in his testimony, confirmed his opposition to the federal government’s current proposal to cap itemized deductions at 28%, in that it has been projected that it would lead to a drop in total charitable giving (in that case of USD6bn), as would most of the proposals listed by the CBO. He also felt that it was not the time to experiment with the charitable deduction by converting it to a tax credit, and that the current system should be retained.
Hatch also attacked the premise that “it is unfair for a donor in a higher marginal tax bracket to receive a larger deduction than a donor in a lower bracket,” as that kind of reasoning misses the point that the tax code should encourage the direction of sufficient resources to charities.
It therefore “makes perfect sense to provide the greatest tax incentive for giving to the donors with the greatest capacity to give. The upper income donors, the ones in the high marginal tax brackets, are the very donors that are in a position to give substantial amounts to charity.”
He also discouraged the proposals to put a floor on the charitable deduction, as such a deduction should begin “with the first dollar given”. He did not believe that Congress “should change current law and take away the charitable deduction for modest gifts merely because we can rely on citizens to continue giving their hard-earned money to churches and charities regardless of the tax benefit they receive.”