Changing charitable tax code could harm churches & charities, senators told

Baptist Press
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Posted: Oct 21, 2011 5:52 PM
Changing charitable tax code could harm churches & charities, senators told
WASHINGTON (BP) -- The current tax deduction for charitable giving is under attack, and the services provided by churches and other institutions could suffer, U.S. senators were warned Oct. 18.

"Tax reform options being discussed today are options that target charitable giving concocted by those who, hungry for more tax dollars to finance reckless government spending, are now casting their sights on the already depleted resources of charities and churches," Sen. Orrin Hatch, R.-Utah, said at a hearing by the Senate Finance Committee.

The committee heard testimony on a proposal by President Obama that would ultimately limit charitable deduction. A prominent research organization has estimated the projected 28 percent cap on itemized deductions could cause a $6 billion drop in charitable giving, Hatch said. Some witnesses expressed their fear that non-profits, charities and churches will suffer during this time of economic crisis if the incentive to give money is suppressed.

Sen. Max Baucus, D.-Mont., the committee's chairman, noted one-third of taxpayers itemized deductions last year. Of those, 86 percent claimed charitable deductions.

Higher income families tend to donate to medical facilities, while lower income families contribute often to religious establishments and basic needs charities, Baucus said in his opening statement. Hatch said an alteration in the current tax code could cause donations to decrease and significantly damage the non-profits' ability to continue serving the community.

"Charitable donations are the lifeblood of charities, and the last thing Congress should do is interrupt the blood supply," said Hatch, the lead Republican on the committee.

Frank Sammartino, assistant director for tax analysis at the Congressional Budget Office (CBO), presented the committee with options for revising the tax handling of charitable contributions. The CBO, he said, categorized 11 possible alternatives into four groups:

-- Retaining the current tax deduction for itemizers but adding a floor or minimum level.

-- Allowing all taxpayers to claim the deduction, with or without a floor.

-- Replacing the deduction with a nonrefundable credit for all taxpayers, equal to 25 percent of a taxpayer's charitable donations, with or without a floor.

-- Replacing the deduction with a nonrefundable credit for all taxpayers, equal to 15 percent of a taxpayer's charitable donations, with or without a floor.

Expressing his opposition to changing the charitable deduction, Hatch said the goal is not to reward some donors more than others or allow the federal government to experiment by converting the deduction into a tax credit.

"It's not really about the donor at all," Hatch said. "It's about the charity. It's about directing sufficient funds to charities so that they can carry forward the good work our society so desperately needs them to perform."

He also explained that lower income Americans are more generous than wealthier ones, giving a higher percentage of their income than higher income taxpayers, regardless of tax benefits. Economists call it "inelastic charitable giving," but Hatch called it "giving from the heart."

Russell Moore, dean of the school of theology at Southern Baptist Theological Seminary in Louisville, Ky., gave a brief statement and said the discussion cannot be boiled down solely to economics. Urging the senators not to change the charitable tax deduction, Moore said giving to charities "teaches and shows that there are things more important than simply the abundance of our possessions."

"We're not simply economic units," Moore said.

The hearing can be viewed online at http://1.usa.gov/qCNXCo

Holly Naylor is an intern with the Washington bureau of Baptist Press.

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