In the Opinion “Tax-Code Overhaul Could Harm Charities” published by The Chronicle of Philanthropy (February 3, 2005), Rep. Charles B. Rangel (ranking Democratic member on the House Committee on Ways and Means) and John Buckley (the Committee’s Democratic chief tax counsel) critically address some of the goals reportedly forwarded by President Bush. Among their insights:
- Repeal of the deduction for state and local taxes would result in a fairly substantial increase in the number of taxpayers who don’t itemize their reductions, reducing the number of people who would be eligible to deduct their charitable contributions.
- The elimination of taxes on investment income (e.g., interest, dividends, capital gains) could result in reduced giving by wealthy taxpayers with large amounts of investment income but little wage income. First, because such taxpayers would not have as much incentive to reduce their income, it would remove one of the incentives such taxpayers may have for making charitable contributions. Second, it would also provide an incentive for such donors to hold back their donations and allow the funds to grow while still within their control. Under current law, a donor typically may prefer to make the contribution, and get the deduction, earlier rather than later, and allow the donations to grow tax-free under the charity’s control.
Rangel and Buckley argue that “[a]ltering the system could lead to major changes in the way in which individuals make charitable contributions and could harm charitable organizations since the law would encourage Americans to hold on to their money, rather than make irrevocable gifts to charity.”