The Senate starts debate this week on their version of a tax reform bill that was passed by the Senate Finance Committee on November 16th. This follows the passage of the House’s version of a tax reform package.
Like the House version, the Senate proposal would cut individual and corporate tax rates, repeal most deductions, and according to Congressional Budget Office analysis, would add $1.4 trillion to the federal deficit over the next decade.
As Congress works to negotiate and pass a final tax reform bill that reconciles key differences between the Senate and House versions, there are a number of policy issues at play that Hunger Fighters and non-profit supporters should be concerned about.
Please take action today!
*Update: The Senate Budget Committee passed their version of Tax Reform on 11/28/17, moving it one step closer to a full Senate vote. Your outreach to your Senators is more important than ever.
Tax reform should also benefit lower income Americans
Taxes provide the revenue for the federal government to provide for the common good, like building roads and infrastructure, funding the military, helping state and local governments fund schools, and providing for the general welfare of its citizens. These investments bind us as a nation and provide the resources for people to build thriving communities where they live.
The questions at the core of the public discussion on tax reform are important ones and we recognize that tough, challenging tradeoffs are necessary to strike the right balance of benefits to American taxpayers, an extremely broad and diverse stakeholder group.
We are confident that such a tax reform proposal is possible but the current tax reform proposals do not provide enough of a direct benefit to the taxpayers who are most at risk of being food insecure. In fact, according to the same CBO report, taxes for people making under $30,000 would actually increase by 2019.
Increase of Federal deficit
As mentioned, the tax reform proposals would increase the Federal deficit by at least $1.4 trillion over the next 10 years. The lost revenue will undoubtedly increased pressure to cut important federal programs that provide vital assistance to states and local governments that help people living in local communities in our state.
We fully expect that with the increase in the federal deficit, the pressure to cut important hunger fighting and health promoting programs like Medicare, Medicaid, SNAP, the National School Lunch Program, and WIC to increase over the next few years.
While the charitable sector does great work filling in the gaps in human service programs, it is not equipped to deal with the increase in need should significant cuts to the federal social safety net occur.
For example, the charitable food network in Wisconsin is less than 10% of all of the federal nutrition spending in our state. Some early proposals to cut the SNAP program by 25% would effectively wipe out the impact of every last pound of food the emergency food network in Wisconsin distributed in 2016, twice over.
Reduction of the donation incentive
Both the Senate and House version of the tax reform proposal keep the Charitable Giving Deduction, a century-old tax policy provision that gives taxpayers that itemize their tax return the ability to deduct their donations to charity.
However, both versions also double the standard deduction that taxpayers can take. While this would greatly simplify most Americans's tax returns, this would also greatly reduce the number of taxpayers that itemize their taxes and therefore takes away the charitable giving incentive from about 95% of taxpayers.
According to some estimates, this could reduce charitable giving by $13 billion a year.
We know that our donors are generous and they give because they are concerned about fighting hunger in their communities not because of the tax incentive but data across the non-profit network suggests that the tax incentive impacts how much people give.
Food banks in our network receive 25% of their annual donations in the month December, which suggest that the incentive does drive some end of the year tax planning.
Potential Repeal of the Johnson Amendment
The Johnson Amendment is a provision in the tax code that prohibits 501(c)(3) non-profit organizations from endorsing or opposing political candidates.
We are concerned about the potential repeal of the Johnson Amendment because the non-profit community - and the issues and people we serve and represent - should remain a place free from the partisanship.
In this era of hyper partisanship and polarization, we believe that the non-profit community ought to be preserved as a place where trusted information can be found on the important issues that affect local communities.
Feeding Wisconsin joined a letter signed by thousands of national and state non-profits asking our members of Congress to ensure that the Johnson Amendment is preserved in the tax reform.
For a comparison of how the two tax reform bills compare, please see this chart prepared by the National Council on Nonprofits.
Senate action on tax reform will start this week and given the goal to have a bill to the President’s desk by Christmas, things will happen quickly over the next few weeks. It is important that you reach out to your members of Congress to let them know how the tax reform proposals would affect low-income Americans and non-profits in Wisconsin and throughout our nation.
Please take action today to tell your Members of Congress that you want a better tax reform proposal, one that protects low-income Wisconsinites and the non-profit organizations that serve them.