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Coalition Addresses ‘Blank-Slate” Tax Reform

Responding to the idea for overall tax reform to start from scratch, the Charitable Giving Coalition (CGC) made its case for preserving the charitable tax deduction in a letter to leaders of the U.S. Senate’s Committee on Finance.

The letter, signed collectively by almost 50 nonprofit organizations, was sent to Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, and Orrin Hatch (R-Utah), its ranking member. The two have proposed a “blank-slate” tax reform plan in which all tax breaks would be eliminated and lawmakers would have to submit justifications for keeping them.

The charitable tax deduction, the coalition said, “clearly meets the three criteria” established by the committee: advances important policy objectives, helps bolster the economy and makes the tax code fairer. The charitable deduction “enhances the ability of individuals and businesses to help neighbors in need, as well as to create, fund and operate the institutions that make up the fabric of our civil society,” the letter reads.

The coalition again makes the point that the charitable deduction is different than other itemized deductions because “it encourages individuals to give back a portion of their income to their communities. It is unlikely that any other tax provision generates that kind of positive public impact.” Without private support, it’s government and taxpayers that will be called upon to fund programs maintained by America’s charities, the charities said.

Furthermore, the coalition emphasized that the deduction helps create a “vibrant and economically vital charitable sector,” generating $1.1 trillion annually in jobs and services, employing one in 10 U.S. workers, who receive some 9 percent of all wages paid in the U.S.

Allowing for a deduction at the same rate at which taxes are paid ensures that gifts are not subject to an additional tax, the coalition said. “Fairness requires that charitable donors not be taxed on money donors do not have, and on income they do not retain.”

The coalition presented evidence of “overwhelming public support” for protecting the charitable deduction, citing surveys by United Way Worldwide and others that show a range of 56 to 80 percent of Americans favor the deduction in its current form or opposed to reducing it.

“Harmful changes to existing policy also would undermine the fiscal strength of charitable organizations and the millions of employees affiliated with them.”