As Congress and the deficit super committee continue to grapple with the issue of tax reform, the Senate Finance Committee has held a series of hearings on various tax reform ideas. Last week, the latest hearing in that series focused on federal tax incentives for charitable giving. During the hearing, suggestions were debated about different ways of reforming the current deduction in order to bring in more revenue that could be used for deficit reduction.
Under current law, income tax filers in the highest tax bracket are allowed to deduct up to 35% of the amount of their charitable contributions from their tax bill. President Obama has proposed capping the deduction at 28% for individuals making more than $200,000 per year and married couples earning more than $250,000. Other proposals floating around include replacing the deduction with a tax credit and establishing minimum levels of giving. Several of these proposals would lessen the incentive for charitable contributions and have the potential to reduce private donation levels, which could impact CWLA and its membership.
While the Senate Finance Committee is technically independent from the deficit super committee, several members sit on both and the two committees are sharing information and ideas about potential tax reforms. However the potential inclusion of a tax reform component in the super committee’s final recommendations remains dubious, as Democrats and Republicans have been thus far unable to bridge their differences on whether revenue should be used to pay down the deficit.
For more information on the charitable tax deduction issue, click here: https://www.independentsector.org/charitable_deduction