The dog and pony show on Capitol Hill, commonly known as a hearing regarding the charitable deduction called by the House Committee On Ways and Means, was an irritating exercise that was pretty much worthless. It was so without value that the committee’s ranking member, Rep. Sandy Levin (D-Mich.) called the discussion an “important, but not very immediate topic.”
The event was held just five legislative days before the sequester – automatic, across-the-board spending cuts – was scheduled to kick in. You’d think Congress would have a few better uses of its collective time.
Here are a few facts in evidence: The federal government has a deficit with so many zeros it doesn’t seem like a real number when you write it down; the legislative and executive branches are seeking revenue from every stone that hasn’t been squeezed; it cost a still uncalculated amount for the more than roughly 40 witnesses and staff to travel to Washington, D.C., to appear before the committee – money that could have gone to programs.
The committee was regaled with stories about how reducing the charitable deduction from 35 percent to 28 percent or dumping it completely would damage communities. It’s a shame that committee members hadn’t done enough homework to ask intelligent questions or to understand how the tax deduction actually works in their own hometowns.
There were the inevitable questions about rogue charities, as if a United Way chapter somewhere in Iowa has anything to do with a couple of criminals in Virginia who improperly raised money alleging it was for veterans. How those rogues got past the Internal Revenue Service (IRS) was what they should have been asking. They should have hauled Lois G. Lerner, director of the IRS’s Exempt Organizations division, before the committee.
Many committee members clearly don’t understand the sector’s efficiency and impact. Here’s something they should know:
Just about every study — granted done mostly by the tax-exempt sector — shows giving will decline if the deduction is altered. Even if the sector’s revenue from donors was stagnant, it would not keep up with current need.
The sector will also be dealing with the loss of revenue from government contracts that will not be renewed because of the budget problem. As block grants are cut, states will have less money, too, so contracts awarded at the local level will disappear.
Jobs will be lost if the deduction is cut and the cycle of unemployment (thus fewer taxpayers) will be exacerbated by the cuts.
Get it done
The government can find efficiency by consolidating departments that interact with the charitable sector. A streamlined federal process will save organizations time by no longer needing a prolonged scavenger hunt through federal departments.
Revenue from the tax deduction is substantial, estimated at between $170 billion and $200 billion. Yet, that’s roughly one-quarter of the financial contribution made to society by the sector.
Polling shows that American people by and large think Congress is one of the least effective organizations in the nation. The numbers show that the nonprofit sector is returning nearly 5-to-1 services to revenue. Perhaps members of Congress should be doing the people’s business and developing its own 5-to-1 ratio instead of going on break as critical financial deadlines approach.
Score the savings – the nonprofit sector versus Congress. It isn’t even close. NPT
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