Friday, December 2, 2011
The latest edition of the ACR newsletter is available below.
Here is an update from Capitol Hill:
- Super Committee Fallout –
The Joint Select Committee on Deficit Reduction (also known as the Super Committee) did not produce any deal after several months of negotiations. This failure surprised many on Capitol Hill and the public at large, both of whom are now grappling with the possibility of deep spending cuts to defense and domestic programs beginning in 2013. While some are seeking to avoid those cuts, particularly in defense spending, President Obama has vowed to veto any legislative attempts to delay or halt the planned cuts. We expect much of 2012 to be devoted to the question of how to avoid automatic cuts in 2013 either by coming up with $1.2 trillion in deficit reduction or changing the requirement for those cuts.
- Payroll Tax Cut –
At the top of the to-do list for the end of this year is extending the payroll tax cut. Congressional Republicans, Democrats and the Administration have expressed support for this measure, but, as usual, the devil is in the details. The current payroll tax was reduced late last year by two percentage points (from 6.2 percent to 4.2 percent for employees).
Senate Democrats have proposed a bill, S. 1917, that would expand and extend the payroll tax reduction for one year, and would pay for that reduction by imposing a 3.25 percent surtax on incomes above $1 million. This bill follows the President’s proposal to further reduce the payroll tax to 3.1 percent for employees until the end of 2012, as well as reduce it to 3.1 percent for employers on the first $5 million in wages. The bill’s cost of $265 billion would be offset by the surtax. While the Senate failed to take up this bill in a 51 to 49 vote (with 60 votes needed to proceed to their bill)on Thursday, a spokesman for Majority Leader Reid said “now that Republicans have reversed their position on this middle-class tax cut, we look forward to working with them to negotiate a consensus solution.”
Senate Republicans, led by Minority Leader Mitch McConnell (R-KY), oppose the millionaire surtax but have expressed some support for extending the payroll tax cut. Earlier this week, after a closed-door meeting with other Senate Republicans, Senator McConnell said, “In all likelihood we will agree to continue the current payroll tax relief for another year,” and that there was now “a majority sentiment” among Republicans for continuing the temporary tax cut. Accordingly, late Wednesday night, the Republicans offered their own payroll tax cut extension bill, which is paid for by extending the pay freeze for federal employees – including Members of Congress – for another three years and cutting the federal workforce by 10%. This proposal would have resulted in $111 billion in budget savings over a decade beyond the $110 billion cost of the tax extension. The Senate also failed to take up this bill Thursday night, in a 20 to 78 vote.
On the House side, the Republican majority is also stressing that any extension must be fully paid for. Wednesday, Speaker John Boehner (R-OH) said “There’s no debate, though, on whether these extensions ought to be paid for. The president’s called for them to be paid for, Democrats here have called for them to be paid for and so if in fact we can find common ground on these extensions, I think you can take to the bank that they will be paid for.” House Republicans are currently drafting a plan that would extend both the payroll tax cut and unemployment benefits, and this bill could be released as early as next week. The specific offsets have not been released, but it is expected to be quite similar to the Senate Republican bill outlined above.
Despite the failed votes, which were not surprising, the bipartisan, bicameral view that the payroll tax cut should be extended, bodes well for a compromise on payment mechanisms and subsequent passage prior to January 1.
- Remaining Agenda Items – While the payroll tax cut garners most of the media’s attention, Congress may address several other issues before adjourning, such as extending unemployment insurance, extending the Alternative Minimum Tax fix, reforming the reimbursement formula for physicians who treat Medicare patients (a.k.a. the “doc fix”), and continued funding for the government. While some of those measures could be put off until 2012 and be resolved retroactively, the hard-stop to prevent a government shutdown is Friday, December 16th (when the current funding for the government expires).
Super Committee Letdown–Why We Think It Failed
Well, we predicted it would go out with not a bang, not a whimper, but something in between. And boy, were we ever wrong.
Last Tuesday, two days before Thanksgiving, the Super Committee issued a statement that began, “After months of hard work, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee’s deadline.” No deal to cut the deficit –by even one dollar!… (keep reading)
Here are recent headlines you may find interesting:
Charitable Deduction: After the Super Committee’s failure to craft a plan on deficit reduction, The Chronicle of Philanthropy reports that nonprofits are looking at implications for the near future, including the future of the charitable deduction.
In related news: Professor of Law Stephen L. Carter (Yale) traces the history of the charitable deduction and offers arguments why this tax incentive should be preserved. United Way of Delaware CEO Michelle Taylor also opines on the importance of preserving the charitable deduction.
Donor Advised Funds: In a New York Times op-ed, Professor Ray D. Madoff of Boston College Law School is critical of donor advised funds (DAFs) for offering donors an immediate tax benefit though there is an indefinite period for funds to be disbursed and suggests Congress should impose distribution mandates.
Nonprofit Quarterly’s Rick Cohen challenges Madoff’s criticism of donor advised funds existing in perpetuity, calling for a payout floor for DAFs as well as a higher private foundation payout rate.
Special Year-End-Giving Report
The Wall Street Journal published its annual giving supplement which includes advice to donors and challenges conventional thought on a range of topics:
- Should Charities Operate Like Business? (Debate: Charles R. Bronfman and Jeffrey R. Solomon, chairman and president, of the Andrea and Charles Bronfman Philanthropies vs. Michael Edwards, a distinguished senior fellow at Demos)
- The “Thirds Rail” of Nonprofits: Overhead (Interview with Tom Tierney)
- Keep the Stock, Donate the Beans
- Do’s and Don’ts of Soliciting Donations
- Before You Join That Board
- A Hunger for Funding
- Strength in Numbers
- Putting Charities to the Financial Test
- Small Sacrifice, Big Return
Read the report here: http://online.wsj.com/public/page/philanthropy-11282011.html
This Caught Our Eye…
Billionaire Philanthropy:: The New York Times examines why high-net worth donors are using their wealth to advance national and state policy changes. (See also: Donors funding presidential campaigns).
Another recent New York Times article explores the tax incentives related to charitable giving that wealthy donors utilize as part of their broader wealth management. See also: Owners of New York Times Used Tax Loopholes…, New York Sun
— In related news: Naomi Shaefer Riley challenges both Times articles (above) on their criticisms of the motivations and beliefs behind the giving of wealthy donors.
National Giving: USAToday provides a snapshot of giving and volunteerism in the U.S. and provides predictions for giving during the holiday season.
— And in related news…The Combined Federal Campaign has been extended from Dec. 15 through the end of the year having raised $27 million to-date toward its $67.2 million goal for 2011.
Religious Advocacy on the Rise: A recent Pew Research Center study finds that lobbying expenditures for religious organizations increased to nearly $400 million in 2008-2010 increasing fivefold since 1970.
PRI’s: The New York Times investigates the use of program related investments (PRI’s) in for-profit enterprises by private foundations to achieve their philanthropic goals. See also: Philanthropic Facilitation Act of 2011 (HR 3420), which simplifies the process for using program-related investments (PRIs) to further charitable activities.
Overhauling California’s Tax Code: The Think Long Committee for California, a team of political, business and civic leaders including former Secretary of State Condoleezza Rice, Google Executive Chairman Eric Schmidt, philanthropist Eli Broad, and former San Francisco Mayor Willie Brown, have organized to push a ballot measure to overhaul the state’s tax system in 2012. By simplifying the income tax code to two rates and eliminating most credits and all itemized deductions, except among others charitable contributions, they hope to raise $10 billion for the state.
Assessing Financial Strength: The Wall Street Journal discusses ways philanthropists can gauge a charity’s financial strength before giving, tapping donors such as Joanne Florino, Executive Director of the Triad Foundation, for their first-hand experiences.
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