Support Incentives for Charitable Giving in the Economic Stimulus Package

Nonprofits should weigh in on the economic stimulus bill being considered in Congress. It can have a huge impact on the work we do. Take action on this Alert here. OMB Watch believes the stimulus package should include items that create an incentive to spend immediately. It should not be permanent and or be a cover for providing further tax breaks to wealthy individuals or corporations. We believe the plan must provide support to workers affected by the economic downturn and the September 11 attacks. It should also provide general support to state and local governments, along with targeted assistance for health care for the uninsured. The issue is not solely over tax cuts versus spending. Some tax cuts can stimulate growth. For example, accelerated depreciation of capital expenditures may encourage companies to buy equipment and other capital outlays, which, in turn, may encourage business activities. However, most economists agree that what is needed now is immediate government spending to help the economy. On the tax side, there is also discussion of including a charitable deduction for non-itemizers and funds for technical assistance to small community based charities. Many charities that serve low-income communities have expressed concern about ongoing donations, especially in the wake of the September 11 attacks. These charities provide services and assist those most impacted by the economic downturn. Inclusion of charitable giving incentives in the economic stimulus package is a good way to provide relief across the board. The charitable giving incentives being discussed follow the plan in S. 592, a bill sponsored by Sens. Joseph Lieberman (D-CT) and Rick Santorum (R-PA). It would allow a 50% deduction for non-itemizers that contribute over $500 in the first year after passage, increasing the deduction by 10% every year until it reaches 100%. It also would allow tax-free donations from rollovers of Individual Retirement Accounts and deductions for food inventory. This formula could change, depending on the cost and the make up of the total stimulus package. The version passed by the House in HR 7 (opposed by OMB Watch as too small to be meaningful (click here for more information) would cost $13.3 billion over 10 years. The President's economic stimulus proposal, which the Joint Committee on Taxation (JCT) estimates would cost $90-120 billion in 2002, contains no incentives for charitable giving, and is primarily a plan for more tax cuts and acceleration of some of the already passed tax cuts for the wealthy. JCT estimates the cuts would cost $440 billion over ten years if made permanent, and $110 billion if temporary. The temporary option would provide the most immediate stimulus benefits with the least long-term side effects on the budget, a principle that most economists agree should guide the construction of this stimulus package. The President's plan, however, includes permanent tax breaks. An analysis by Citizens for Tax Justice finds that the President's tax cuts would go the wealthiest 1% of Americans, and 75% of taxpayers would receive no cut. See http://www.ctj.org/html/accel.htm Decisions are being made quickly on the stimulus plan. If you have a viewpoint, you should share it with your Senators and Representative. We would also suggest you contact the President and the leaders in the House and Senate. These include House Speaker Dennis Hastert (R-IL) and Minority Leader Richard Gephardt (D-MO), and Senate Majority Leader Tom Daschle (D-SD) and Minority Leader Trent Lott (R-MS). To send a message click here. For details and more analyses of the President's proposal and alternatives to it, click here.
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