Charitable Deduction | Federal
Nov 10, 2011
WASHINGTON UPDATE (11.10.11): Super Committee Plans
The Joint Select Committee on Deficit Reduction (aka the “Super Committee”) is nearing its deadline to make recommendations to Congress on finding $1.2 trillion in reductions to the deficit. The committee is weighing major changes to spending and taxes, including the charitable deduction.
In a closed door meeting Monday (November 7th), Congressional Republicans presented a proposal to the Super Committee that reportedly would boost tax revenue by a net $300 billion over 10 years. A GOP aide to a Super Committee member said the “centerpiece of the plan” would be Republicans accepting elimination of tax deductions associated with wealthy Americans in exchange for a permanent reduction to marginal tax rates set during the Bush administration. Republicans speculated that this could include new limits on deductions for home mortgage interest, state and local taxes and “other provisions” and a permanent extension of the Bush tax cuts that are set to lapse at the end of 2012. While rumors have included a limit to the charitable deduction as part of this net tax increase, so far only the home mortgage interest and state and local tax deductions have been specifically mentioned. Even if the proposal does include limits to all itemized deductions for wealthy Americans, including the charitable deduction, Democrats have downplayed the Republican’s plan as a political document and not a serious effort.
In turn, Democrats on the Super Committee circulated their framework for a deficit reduction plan last night (November 9th) calling for spending cuts AND a tax reform process to raise $650 billion in new tax revenue. This process would be undertaken by the Senate Finance and House Ways and Means committees next year. This plan also includes a trigger—if those committees fail, the alternate debt reduction trigger would go into effect on January 1, 2013. This trigger would include “Feldstein-type” limitations on itemized deductions for upper-income taxpayers, yielding $325 billion in new revenue.
Who or what is Feldstein?
In May, Martin Feldstein, a nationally-known economist called for, among other things, capping itemized deductions for individuals at 2% of their adjusted gross income, but not charitable deductions. It is unclear whether the Democrats’ proposal contemplates this nuance.
The reaction? Both sides immediately criticized each other’s plans as “unrealistic.”
With the November 23rd deadline approaching, party leaders in the House and Senate are meeting on contingency plans. No details yet, but we will report them to you as they happen.