A Tax Bill Tanks Giving

A Tax Bill Tanks Giving

November 17, 2017

Before the House and Senate flew home for Thanksgiving, they got plenty of practice carving up something else: the U.S. tax code. As usual, Speaker Paul Ryan's (R-Wisc.) chamber got the jump on their Senate neighbors by passing a basket of major tax cuts -- and challenged Majority Leader Mitch McConnell (R-Ky.) to follow suit.

By a vote of 227-205, Republicans tried to give Americans something else to be grateful for next week: fuller wallets and freer speech. The Tax Cuts and Jobs Act (which included everything from a rollback of the Johnson Amendment to a boost in the child tax credit) survived, despite the unanimous opposition from Democrats and more than a dozen Republican "nays." As far as Speaker Ryan is concerned, reaching any level of consensus is worth celebrating. "Getting 227 members to agree on something as complicated as the tax code is extraordinary," he said. President Trump, who's been as anxious as the rest of the party for a legislative win, cheered the lower chamber for taking "a big step toward fulfilling our promise to deliver historic TAX CUTs for the American people by the end of the year!"

Even the Senate, the GOP's home of lost opportunities, showed signs of life on the tax debate – passing its own version of the IRS overhaul out of Senator Orrin Hatch's (R-Utah) Finance Committee. After a grueling four-day mark-up, 14 senators gave the plan a thumbs-up Thursday, well past most members' bedtimes. But there's still a long slog ahead, conservatives bruised by the Obamacare debacle warn, especially in a chamber where Republicans have been in a less-than-agreeable mood.

And, as groups from both parties explain, there are still some significant flaws with both bills that need fixing. The biggest, as people across the political spectrum will tell you, has to do with the effect on charitable giving. Obviously, Republicans are trying to put money back in Americans' pockets -- but in the process, they may be taking billions out of nonprofits'.

Charities across the board that serve the needs of the public in a myriad of ways are deeply concerned because the GOP's well-meaning tax reform could have a catastrophic effect on giving. In 2016 alone, Americans donated $282 billion to their favorite causes, churches, and social programs. Experts think charitable giving could take a substantial dip under the new structure of the standard deduction, which could reduce the services and benefits nonprofit organizations provide to communities. "Every year," the Atlanta Journal-Constitution points out, "tens of millions of individual U.S. taxpayers have to decide whether it's a better deal to take the standard deduction or to itemize deductions for things like charitable donations, home mortgage interest, state income taxes, real estate taxes, car taxes and medical expenses. Itemizing adds more complexity and time to what's already a grueling process. But if it can save you hundreds or thousands of dollars, it's worth it for lots of people. Nearly one in three people who file taxes itemize now."

That could drop, analysts predict, from the current 30 percent to just five percent. Suddenly, people who don't itemize would have less incentive to give to charity. And that could affect everything from think tanks to food banks. Now obviously, not everyone's generosity is driven by the IRS. We're a naturally giving country. But for a lot of Americans, the tax code encourages them to donate more than they might otherwise -- and on a regular basis. Here's why that's a big deal, Dan Kopf explains. "For a non-itemizer, $100 dollars given to charity has no impact on their taxes, but for an itemizer who makes around $100,000, the government essentially gives them back $25 for every additional $100 they donate. So instead of the contribution costing that household $100, it really cost only $75."

Obviously, nonprofits don't want that incentive to go away. Congress would be putting the squeeze on charities when more Americans are relying on them than ever. Just look at Hurricanes Harvey and Irma. Where would those states be without groups like Samaritan's Purse? If the level of giving to charities like this drops, it could cripple organizations serving the hurting and poor. Which is exactly why many in the Catholic Church -- whose Catholic Charities provide everything from adoption services to addiction recovery -- oppose the bill in its current form. "The House bill will have a dramatic impact on charitable giving," Bishop Dewane warned, adding that it would amount to a "disincentive to giving," which he worried would jeopardize "some of the safety net programs that help the poor."

And it's not difficult to imagine what would happen if these organizations had to quit -- or severely curtail -- their work. An inefficient government would step in to fill those roles with more federal programs (which not only accomplish less, but cost more). Fortunately, leaders like Rep. Mark Walker (R-N.C.) and Senator James Lankford (R-Okla.) understand the gravity of the situation. Both have introduced language to correct the problem with a "universal deduction" Kopf explains, "that can be claimed on top of the standard deduction, even by those who don't itemize." The deduction would cost the U. S. government about $1.5 billion a year in revenue, but it will result in upwards of $10 billion in chartable spending, which would more than offset the need for expanded government services.

Everyone from FRC to the far-Left Center for American Progress is asking for a legislative fix. It's not often that we agree with George Soros's groups, but they're right on one point: the House and Senate bills, as they currently stand, would have a major impact on charitable giving – and not in a good way. Join us in urging Congress to protect America's culture of generosity. Call or email your senators and ask them to support Senator Lankford's amendment.

Tony Perkins' Washington Update is written with the aid of FRC senior writers.

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