News and analysis
June 27, 2013

Senators Seek to Know Why Charitable Deductions Matter

Richard White/Chronicle of Philanthropy

The two Senators leading the process of crafting legislation to overhaul the tax code announced Thursday that they are starting a “blank slate” that strips out all deductions, exclusions, and credits and are giving their colleagues a month to make their cases for why such tax breaks—including for charitable donations—should be maintained.

“In order to make sure we end up with a simpler, more efficient, and fairer tax code, we believe it is important to start with a 'blank slate,’” states a letter from Sen. Max Baucus, chairman of the Senate Finance Committee, and Sen. Orrin Hatch, the senior Republican on the committee. “Indeed, we both believe that some existing tax expenditures should be preserved in some form. But the tax code is also littered with preferences for special interests.”

The letter was sent to all senators on Thursday, asking them to submit by July 26 detailed proposals for what tax breaks should be included in a rewritten tax code.

Senator Baucus, a Montana Democrat, and Utah’s Senator Hatch wrote that they would only include tax breaks in a rewritten code that are proven to “(1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives.”

The Alliance for Charitable Reform, a project of the Philanthropy Roundtable, immediately released a statement arguing that the charitable deduction meets those standards.

“Our message to lawmakers is the charitable deduction must be included in any sensible tax-reform legislation,” Sandra Swirski, executive director of the alliance, said in a statement. “The good that comes as a result of this deduction is strong justification for preserving it in our tax code. We will work with senators to protect this important charitable-giving incentive in the upcoming tax-reform debate.”

Joanne Florino, senior vice president for public policy at Philanthropy Roundtable, said the Charitable Giving Coalition would spend all of July “visiting 100 Senate offices” to continue to explain the benefits of the charitable deduction.

The coalition’s members include some of the nation’s largest charities, including United Way Worldwide, Catholic Charities USA, and American Red Cross.

“We know there is bipartisan support for the charitable deduction,” Ms. Florino said.

President Obama has failed since 2009 to impose a 28-percent limit on the value of itemized deductions for such expenses as mortgage interest, state and local taxes, and gifts to charities as a way to help tame the federal budget deficit. The Senate Finance Committee issued a report earlier this month that provides links to opinions, research, and testimony the committee has gathered this year for changing the tax rules governing approximately 1.5 million tax-exempt groups with $2.7-trillion in assets.


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