Tax Reform Proposals
Your editorial (Sept. 23), “Tax Reform: a New Beginning,” and articles (Opinion, Sept. 22) by Sen. Bill Bradley (D-N.J.) and Rep. Jack Kemp (D-N.Y.) raised numerous issues about President Reagan’s tax reform plan. Curiously, media attention on the plan rarely focuses on one significant flaw.
The President’s plan calls for immediate repeal of a 1981 law extending the charitable contributions deduction to non-itemizers. The law authorizing this deduction is being phased in to ease federal revenue loss and is scheduled to take full effect for the 1986 tax year--after which it sunsets unless extended before December of next year. The success of the law in increasing charitable giving is a strong argument for extending the deduction. The President’s plan not only prevents an extension. The plan, in fact, stops it from taking full effect next year.
Loss of this deduction in 1986 is expected to cost American charitable institutions over $5.8 billion annually--donations that help meet our country’s health and human service needs. Added to the anticipated loss of more than $4 billion in contributions due to the proposed drop in tax rates overall (i.e. decreased tax incentives for itemizer’s charitable giving), the repeal of the non-itemizer deduction would deal a serious blow to our efforts to raise the funds necessary to serve those in need.
Two-thirds of all taxpayers customarily take the short form and do not itemize deductions. This percentage will increase with the proposed elimination of deductions for state and local taxes. In Los Angeles County perhaps $50-60 million of the $77 million raised last year by United Way would be “at risk.” Add to that, proposed cuts in federal contributions to cities and counties for community service block grants. Nonprofit social service agencies receiving private as well as public dollars would be forced to cut back their services.
Tax incentives for charitable giving are not a “tax loophole.” Our government has always recognized that private sector contributions help meet human needs that government would otherwise be pressed to handle. Congress agrees, and a substantial majority of the House has co-sponsored pending legislation, HR 587, to make the non-itemizer deduction permanent. California has a similar deduction available for non-itemizers.
The Legislature recently voted unanimously to extend the state deduction but to make enactment contingent on extension of the federal deduction. We hope that the House and Senate follow the lead of California’s Legislature in its commitment to human services by deleting the President’s proposed repeal. This law has provided significant assistance to charitable fund raisers such as United Way. But our congressmen must hear from their constituents on this portion of the tax plan, which will come before them later in the year.
Our nation’s private health and welfare organizations are watching the coming tax battle in Congress. Our nation’s welfare depends on its just resolution. We urge The Times to endorse this needed deduction. Its maintenance in our tax codes is in the nation’s interests.
STEPHEN E. CHAUDET
HAROLD J. KWALWASSER
EDWARD AVILA
Los Angeles
Chaudet is chair of United Way’s Government Affairs Council. Kwalwasser chairs the Jewish Federation Council’s Commission on Law and Legislation. Avila is a member of the Los Angeles Board of Public Works and is a United Way board member.