Reading Between the Lines: The GOP Tax Reform Plan
Editor’s Note: Sandra Swirski and Sara Barba of the Washington, D.C., advocacy firm Urban Swirski & Associates offer regular analysis of public policy developments of interest to Southern grantmakers – reading between the lines so you don’t have to.
As you may have seen, on Wednesday the White House, House Ways and Means Committee and Senate Finance Committee released a new tax reform document that is intended to serve as the template for tax writers when drafting tax reform legislation. The short version? There wasn’t a lot of new information. But it was what wasn’t said that was truly revealing – and disappointing. This week, we’ll read between the lines of the framework to shed some light on what it might mean for the charitable sector.
Increased standard deduction of $24,000 for married taxpayers filing jointly and $12,000 for single filers;
Three tax brackets (12 percent, 25 percent, 35 percent) with the option for lawmakers to add a fourth for the highest income earners;
Elimination of most itemized deductions, but retains tax incentives for charitable giving and home ownership; and
Repeal of the estate tax and generation-skipping transfer tax.
On The Bright Side…
The language in the framework recognized the importance of charitable giving as a tax benefit that helps “strengthen civil society, as opposed to dependence on government.” So these tax negotiators recognize charitable giving is critical to the foundation of society. They plan to cut out a lot of other itemized deductions, but kept charitable.
... It’s Missing A Lot
The consequences have been made clear: if you double the standard deduction, fewer taxpayers will itemize and fewer taxpayers will have a tax incentive to give to donate their income to charity. Lawmakers have acknowledged the damage this could do to charitable giving, and they have expressed a desire to mitigate that.
When it comes to unlocking more charitable dollars and encouraging more Americans to be charitable – both goals Ways and Means Chairman Kevin Brady (R-TX) has stated – the Big 6 tax negotiators missed the mark. In fact, in its current form, this framework would accomplish the opposite of those goals. There are no details about how the tax code would incentivize those who would no longer be able to deduct their charitable contributions from their taxable income, and there isn’t even an acknowledgement that the other pieces of the framework would negatively affect charitable giving.
The authors also didn’t detail any other provisions that could unlock more charitable dollars, such as expanding the IRA charitable rollover to Donor-Advised Funds or streamlining the Private Foundation Excise Tax, among many, many others. But no other industry received that level of detail either.
We hoped for a lot more than we got this time around. We’re doubling down on our meetings with Members of Congress from here on out to remind them of the essential nature of charitable giving and consider all possible ways to enhance the charitable sector as they’re using this framework to craft a tax reform bill.
Sandra Swirski is a partner at Urban Swirski & Associates; Sara Barba is assistant vice president at the firm.