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>> Federal: Ryan Holds First Hearing, Outlines Committee Agenda
>> Federal: Chairman Hatch Unveils Tax Reform Working Groups
>> Federal: House Democrat Unveils Tax Proposal
>> Consider This: Ships Passing in the Night
>> Top Reads: 5 Policy Moves to Watch in 2015
You are invited to the sixth annual Alliance for Charitable Reform Summit for Leaders.
8:00 am – 11:00 am
Washington Court Hotel
525 New Jersey Avenue, NW
Washington DC, 20001
With so many tax issues still to be debated, nothing is completely on or off the table. Given the new political landscape, now is not the time for the philanthropic community to stay on the sidelines. We hope you will join us at the 2015 ACR Summit for Leaders to learn what we can do to protect private giving and educate lawmakers about the critical role of charitable organizations in a free society.
Registration: To register for the ACR Summit as well as other events of Philanthropy Week in Washington, click here. Attendance at the ACR Summit is free of charge. Detailed programming will be announced in the near future.
President Obama delivered his annual State of the Union address on Tuesday. The speech focused less on specific proposals and more on broader economic, social, and foreign policy values.
The President discussed tax reform only briefly and offered no new specifics. He did call on Congress to end the tax benefits that “lead to inequality by allowing the top one percent to avoid paying taxes on their accumulated wealth.” The President said that money could be better spent on helping “more families pay for childcare and send their kids to college. We need a tax code that truly helps working Americans trying to get a leg up in the new economy, and we can achieve that together.” While President Obama did not specifically reference a 28 percent cap on itemized deductions during his address, his repeated calls to curtail tax incentives for upper income earners likely means the Administration will continue to support a 28 percent cap.
Ahead of Tuesday’s speech, the White House released documents outlining a new middle class tax cut plan. The proposal would raise $320 billion over ten years – $210 billion from new capital gains tax revenues and $110 billion from bank fees – to help pay for new programs designed to help lower and middle-income families. The plan would raise taxes on capital gains and dividends from 23.8 to 28 percent for joint filers with income above $500,000 and changes the way capital gains are taxed when assets are inherited in an effort to raise more revenue. In an encouraging sign, the President’s inherited assets proposal exempts gifts to charitable organizations.
We expect more details about this proposal to be included in the President’s upcoming FY2016 budget due to be released February 2.
Republicans immediately pushed back against the President’s tax suggestions. In a press release after the President’s speech, House Ways and Means Chairman Paul Ryan (R-WI) said, “A $320 billion tax hike is the last thing we need. What we really need is to make our tax code simpler, flatter, and fairer, so we can create more jobs.” Senate Finance Committee Chairman Orrin Hatch (R-UT) added that the President’s plan makes it clear that he “is more about redistribution and populist class warfare than about actual bipartisan tax reform.”
Last week, Chairman Ryan held his first hearing of the 114th Congress to examine policies that could promote job creation and economic growth. In his opening statement, Ryan called for making “the tax code simpler, fairer, and flatter.” Witness testimony primarily focused on the tax rate that corporations pay and ways to address lowering rates for other types of businesses – mostly smaller ones. Charitable issues were not addressed.
During the hearing, Ryan noted that tax reform initiatives could advance at a “pretty aggressive” pace over the next year. He also made it clear that he would not replicate hearings and working groups that were undertaken by his predecessor, Dave Camp (R-MI). Chairman Ryan has invited his Republican Committee Members to a retreat at the end of this month – January 28-30 – to share his vision and get their input both on substance and process for undertaking tax reform. We expect to learn more about the outlook for tax reform in the House after this retreat.
Across Capitol Hill, Senate Finance Committee Chairman Orrin Hatch (R-UT) announced the introduction of five bipartisan working groups to examine the following areas of tax reform: individual income tax, infrastructure and community development, savings and investment, business income tax, and international tax issues. Each group will have a Republican chair and a Democratic vice chair, and will provide non-binding policy recommendations in those specific policy areas. These groups resemble the working groups former Chairman Camp put together last year, although much larger in scope. We expect charitable issues to fall under both the individual and business income tax groups.
The Chairs of each group are as follows:
- Senators Mike Enzi (R-WY), Chuck Grassley (R-IA), and Debbie Stabenow (D-MI) will chair the Individual Income panel
- Senators John Thune (R-SD) and Ben Cardin (D-MD) will chair the Business tax panel
- Senators Mike Crapo (R-ID) and Sherrod Brown (D-OH) will chair the Savings and Investment panel
- Senators Rob Portman (R-OH) and Chuck Schumer (D-NY) will chair the International panel
- Senators Dean Heller (R-NV) and Michael Bennet (D-CO) will chair the Community Development and Infrastructure panel
On January 12, House Budget Committee Ranking Member Chris Van Hollen (D-MD) introduced a middle class tax cut plan. The plan is paid for by imposing a new 0.1 percent fee on financial transactions and by increasing the tax on capital gains. Issues related to the charitable community were not specifically mentioned. While the plan has little chance of advancing in this Congress, it could serve as a message document for Democrats as they head into the 2016 elections.
There’s been a lot of chatter in Washington over the last several weeks about what to do about taxes. Frankly, it feels a bit like the two parties are ships passing in the night. It beats being put on a collision course, but falls short of getting to an agreement.
Heading into his State of the Union, the Administration was talking up the President’s proposal to provide low and middle income tax cuts paid for by one-percenter tax increases. His State of the Union discussion was very light on overall tax reform and didn’t delve into what some are calling his $320 billion “Robin Hood” tax proposal. As you may expect, his tax proposal did not go over well with Republicans. The office of Ways and Means Chairman Paul Ryan issued a press release titled, “The Obama Tax Hike in a Word: Seriously?”
Meanwhile, both House and Senate Republicans are moving quickly to see how much progress they can make in a short amount of time on tax reform that lowers rates and sweeps out at least some tax credits and deductions. While the Administration gives some attention to business tax reform, that attention doesn’t rise to the level of leaning in.
Will there be a place to meet in the middle over the next two years? We think the President’s proposal is really more about setting up the Democratic Party for the 2016 elections. It’s more of a message piece than anything else. That being said, we think that there is chance for Congress and the Administration to find some common ground on taxes over the next two years, if there truly is a will to do so.
- National: 5 Policy Moves to Watch in 2015
- National: 5 Hot Causes for Donors in 2015
- National: CGC Urges New Congressional Members to Protect Charitable Deduction
- National: Schwab Charitable Reports 25% Rise in Grants in 2014
- National: Tax Overhaul Gets Senate Point Man
- National: Orrin Hatch: Tax Revamp Effort Is ‘Not Theater’
- National: Vanguard Charitable grants $5 billion to charity since inception
- National: Nonprofits Find Much to Like in Obama Tax Plan
- Opinion: Obama’s SOTU Surprise: A Break for Charity
- Opinion: Special funds that give much
- ACR Blog: ACR Marks 10 Years
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