Monday, January 09, 2006

Senate Tax Bill Charitable Provision Creates Controversy

(Post #300) The Senate's last-minute tax bill from December (S. 2020) has provoked debate within the charitable community. A provision allows nonitemizers to deduct cash contributions in excess of $420 for married filing jointly (MFJ) taxpayers and $210 for single taxpayers; the same provision allows cash and noncash contributions with the same floors for itemizers for the 2006 and 2007 tax years. Indicative of the 50 or so organizations which wrote criticizing the measure was Kelly Browning of the American Institute for Cancer Research who said that the measure was bad tax policy and had only a limited window for comment (eight days) before being included. Others of the group complained that the reduced deduction for itemizers might discourage charitable giving. Independent Sector, an umbrella group for nonprofits favoring the provision, acknowledged the negative of the floor for itemizers but argued in effect that with Chairman Grassley wanting a revenue-neutral result, that providing nonitemizers with some deductibility for charitable contributions was worth the cost of some damage to itemizers.

I am of mixed emotions here, I personally am better off with full itemizer deductibility but can see a vertical equity argument for the Senate provision. The most valid argument in my mind is Browning's complaint about limited due process; why not take the provision out at this point and reoffer it in a 2006 bill?


Blogger WileE said...

I can see no good coming out of a floor on charitable deductions. Two things currently distinguish charitable gifts from other deductions: (1) the absence of a floor and (2) the carry forward of excess contributions. One those distinctions are eliminated, "adjustments" are much easier to accomplish. For example, what would the effect of charitable gifts be if they were subject to a 2% floor as is the case for miscellaneous deductions?

11:25 AM  

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