Senate Narrowly Rejects Language Opposing Obama Deduction Plan

March 26, 2009

Senate Narrowly Rejects Language Opposing Obama Deduction Plan

The Senate today narrowly rejected a move to criticize President Obama’s proposal to limit tax breaks wealthy people can get for charitable gifts, instead adopting language saying only that Congress should preserve the charitable deduction on income taxes.

Sen. John Thune, Republican of South Dakota, had proposed that the lawmakers express support for the current deduction system, arguing that the president’s plan would harm charities by lowering an incentive for giving.

But the senators rejected his proposed resolution by a 48-49 vote after Sen. Max Baucus, chairman of the Senate Finance Committee, offered an alternative text.

Senator Thune’s proposal, an amendment to a national-service bill, asked lawmakers to approve a “sense of the Senate” that Congress should preserve the “full” federal income-tax deduction “and look for additional ways to encourage charitable giving.”

Senator Baucus, Democrat of Montana, argued that language was too broad. “It would put the Senate on record as favoring preservation of incentives for charitable giving over all other priorities,” he said. For example, it could prevent the Internal Revenue Service from cracking down on a charity scam or impede efforts to repeal the estate tax, which encourages charitable giving by allowing people to decrease the tax liability on inherited wealth, he said.

“What if we reach a bipartisan budget agreement to limit the deficit and help to balance the budget,” he added. “Might we want to consider, I say just consider, limiting the ability of upper-income taxpayers to take their full deductions?”

Senator Baucus proposed that the Senate remove the word “full” and just express support for preserving the charitable deduction.

That amendment passed by 56 to 41. All those voting against were Republicans.

President Obama has proposed curbing tax breaks on itemized deductions, including donations to charity, for the wealthiest Americans as a way to raise money to revamp the health-care system, starting in 2011.

“The Senate missed an opportunity to affirm our commitment to charitable giving,” Senator Thune said in a press release after the vote. “Government programs alone cannot replace the services that nonprofits and private charities provide to those in need, especially during these difficult economic times.”

— Suzanne Perry

Comments

The growth of government run programs has never been able to fill the void of charitable need and services required by our society and filled by non profits.

And, while I believe that people give for many noble reasons, it is sound policy to allow deductions to those who contribute to the needs of other.

As for the argument that the deduction benefits those in higher tax brackets marginally more than those in lower brackets, we should look at the relative tax burden born by these groups.

David M. Frees III, Esq
http://www.utbf.com/trust-estate

— David M Frees III Esq Mar 27, 09:56 AM #
I have to disagree with Mr. Frees. The non-profit community has never been able to fill the needs for services provided by the government.

Generous deductions would still be allowed udner Obama’s proposal. I doubt that reducing one’s tax break from 35 cents on the dollar to 28 cents would have any substantial effect on giving. Add to that the additional tax break that one can receive by donating appreciated stock, and the marginal difference is even less.

As for the relative tax burden borne by different groups, of course the wealthy pay more. That’s because, well, they’re wealthier. The only way to get the bottom 10% of earners to pay 10% of taxes is with a head tax. I don’t know anyone who advocates that position—or even a true flat tax (everyone supports an exemption for the first $x-thousand of income, which means it’s already a two-tier system).

I think most people decide how much to give and then look for the most tax-effective way to do so. So I doubt the limit proposed by Obama will have much of an effect. Foundation giving is of course totally unaffected. And I see no reason why someone who is making less, and so is making a bigger per-dollar sacrifice, should not get the same tax break as those who can afford to give far more.

— Daniel Simon Apr 21, 04:57 PM #

Commenting is closed for this article.

Previous: Foundation Leaders Visit Lawmakers on Capitol Hill
Next: Congress May Cut Some Foreign-Aid Money From Proposed Budget