Tax Reform Buzzwords
The House and Senate are on a break this week so we thought this might be a good time to take a breath and run through some of the buzzwords and catch phrases on tax reform that might affect the charitable sector. Only a few policy makers will say “we should limit charitable giving incentives.” But that does not mean the outcome of what many policy makers are proposing will do just that.
General phrases like this should catch your attention include:
- “Limit tax breaks for upper income earners”: These proposals limit the tax credits and deductions taken by those earning more than $250,000 a year (generally). One of the most common deductions for this group is the charitable deduction, so absent a clear carve-out, such a proposal would cut, cap or remove the charitable deduction.
- “Eliminating tax expenditures”: What some call spending through the tax code, others call incentives designed to promote a program or behavior. Technically, a tax expenditure is revenue lost due to a special exclusion, exemption, or deduction from gross income or provision of a special credit, preferential tax rate, or deferral of tax payment. Revenue counters say charitable giving incentives could fall into this category, although we believe charitable giving incentives are different.
- “Pay a fair share”: This term is best represented by the so-called “Buffett Rule,” which would create a minimum tax rate of thirty percent for those whose income exceeds $1 million a year. At present both the House and Senate Buffett Rule bills exempt charitable gifts but this could obviously change. Other measures that have been proposed that target upper income earners do curb charitable giving incentives.
These are just a few of the words and phrases to be looking out for as fundamental tax reform looms on the horizon. While we are unlikely to hear very many policymakers go after charitable giving incentives directly, those incentives could be lumped into broader measures like those above if we aren’t vigilant.