House Ways and Means Chairman Dave Camp’s tax reform plan would slash charitable giving by as much as $34 billion a year, according to a new study.
Camp’s plan, released in February, placed some limits on the deduction for charitable giving that had already worried the nonprofit sector.
U.S. taxpayers gave roughly $240 billion to charity in 2013, a figure that would be reduced by 7 percent to 14 percent under the Camp plan, the study argued. Wealthier taxpayers, the most likely to donate to charities, would see their tax incentive to give reduced the most.
Camp’s draft lowers rates for individuals, and installs a larger standard deduction, reducing the number of people who would itemize their taxes.
“While the Camp plan alters the charitable deduction in several ways, a large percentage of the overall effect on giving arises from indirect changes to tax laws that greatly reduce the number of taxpayers who itemize and generally lower statutory tax rates,” the study’s authors wrote.
Still, the authors of the study also acknowledge that there are a lot of unknowns when it comes to projecting how taxpayers would respond to the changes in the code.
Camp himself has repeatedly argued that his plan would actually increase charitable giving, by around $2.2 billion a year. Under the draft, taxpayers would only be able to deduct charitable donations above 2 percent of their income.
That’s because the streamlined tax code would boost economic growth by as much as 1.6 percent, Camp argues. That boost in the economy, he says, would have a greater impact on charitable giving than any of the specific changes to the deduction.
“The best way to promote charitable giving to the organizations doing so much good in communities across the country is to improve the overall economy, which is precisely what comprehensive tax reform is designed to achieve,” a Ways and Means release on Camp’s plan said.
Either way, the study also underscores the challenges that come with tax reform, including projecting how changes in the code will impact revenues and the overall economy.
Camp’s draft failed to gain support even among most Republicans, in part because of the tax breaks that would need to be sacrificed to bring down tax rates.
For instance, Senate Finance Chairman Ron WydenRon WydenSenate sends annual defense bill to Obama's desk Senate fight over miners' heathcare boils over Budowsky: Did Putin elect Trump? MORE (D-Ore.), the other tax-writing chairman in Congress, has said that he won’t back any changes to the charitable deduction as he seeks to overhaul the tax code.
Camp’s draft also proposes new restraints to the deduction for home mortgage interest, another expensive and popular tax break.
Nonprofit groups have been defending their prized deduction for years, from attempts from both Democrats and Republicans to limit its value.
William Daroff of the Jewish Federations of North America said in February that Camp’s plan “adds unnecessary obstacles for donors who want to support the efforts of America’s charities.”
President Obama has sought to limit the value of itemized deductions for wealthy taxpayers since his first few months in the Oval Office.