Mar 25, 2011
Congress Tackles Tax Incentives
Consider this…
Next week, the Senate Finance Committee is due to hold a hearing on how complexity and uncertainty affect the use of tax incentives for things like charitable giving and retirement savings.
We will be watching this hearing closely and hope to get a better sense of where policymakers are headed on the question of whether we should trade or trim tax incentives on items like the charitable deduction to achieve a “flatter” tax code with lower tax rates. To date, we think it is fair to say that policymakers have been all over the map on these questions and we won’t conjecture where it will all land.
We do think it is important for policymakers to get it right. Charitable incentives help drive giving, but they also help support jobs. As Dr. James Galbraith from the University of Texas remarked in a Finance Hearing earlier this year, “Philanthropy provides about eight percent of all of our employment.” In this job-starved economy, it will be interesting to see which, if any, positive impacts of charitable giving – such as jobs - policymakers consider in this debate.
Congress does have a record of enhancing tax incentives for charitable giving in times of crisis so it would appear there is at least some view among policymakers that these incentives do work. Enhanced tax incentives were put into place following the 2004 Indian Ocean tsunami, Hurricane Katrina in 2005, the Midwest floods of 2008, and the earthquake in Haiti in 2010.
The terrible events in Japan and the subsequent efforts to extend assistance remind us of our collective impulse not only to help but to identify the best way do so. If we view such giving as a priority, shouldn’t we do what we can to encourage it?