Congress Urged to Embrace Payroll Tax Reform for Working Families and Charities -- But Reject 'CARE' Act and Bush Tax Plans

4/8/2003

From: Sloan C. Wiesen of the National Committee for Responsive Philanthropy, 202-387-9177 or sloan@ncrp.org

WASHINGTON, April 8 -- Congress should consider proposals for fair payroll tax relief and reform to help working families and charities struggling in this economy -- and lawmakers should reject President Bush's tax breaks for the wealthy, as well as the current version of the Charity Aid, Recovery, and Empowerment (CARE) Act (S. 476) scheduled for a Senate vote this week. That was the recommendation issued today by the National Committee for Responsive Philanthropy (NCRP), a watchdog group promoting philanthropic effectiveness with an eye toward social justice for all Americans.

"Instead of more targeted special perks for the privileged few, any tax relief should be shared fairly among the vast majority of Americans who need it the most and are most likely to use it to stimulate the economy and support charity," said NCRP Executive Director Rick Cohen. "Payroll tax reform would be a much more fair and effective stimulus than the president's tax plans, which primarily target the wealthiest few for special benefits. We also believe enacting the right kind of payroll tax relief would be a far wiser direction for Congress to take than passing the problematic version of the CARE Act now under consideration."

NCRP believes offering payroll tax relief and reform would return more money to middle- and lower-income working families -- who are more likely to spend it to stimulate the economy and are also the most generous with their charitable dollars. Research shows that the lowest fifth of wage earners with positive net worths donate the highest percentage of their incomes to charity. NCRP suggests that -- rather than through the costly and inefficient non-itemizer deduction contained in the CARE Act -- the generosity of working families could be much more effectively tapped by providing payroll tax relief. NCRP believes one way to offset the cost of such relief would be to restructure the wage base for the Social Security payroll tax, which stands at $87,000 annually for 2003; income in excess of that amount is not subject to the tax.

As one central cause for concern over the CARE Act, NCRP pointed to Congress's own assessment of non-itemizer deductions, which allow taxpayers who do not itemize their tax returns to take a tax deduction for their charitable giving. According to the Congressional Budget Office's analysis of the non-itemizer formula closest to the language of the CARE Act, it would cost the public $1.00 of lost tax revenues for every 64 cents of charitable giving the provision generates. Other analyses suggest that if enacted, the provision would not stimulate large amounts of new charitable giving, as it would principally apply to charitable gifts that are already being made, even without the deduction.

"Regrettably, the non-itemizer provision in this version of the CARE Act becomes more harmful the more it is used," noted Cohen. "It takes away far more in public investment for America's taxpayers than it gives to our nation's charities in return -- charities that are increasingly bearing a disproportionate burden for services that rightly should be shared in a reasonable, balanced partnership between the public, private and nonprofit sectors. Despite its best intentions, the non-itemizer provision in the CARE Act would essentially rob Peter of a great deal to pay Paul but a little."

Also of concern to NCRP is language in the current version of the CARE Act that would specially benefit direct service providers while penalizing nonprofits that engage in public policy advocacy - creating a false and harmful distinction between these two types of vital nonprofit activities. That provision, establishing an expedited review process for direct service providers but not for advocates, is deemed especially harmful to nonprofit organizations and the vulnerable communities most in need of their work. It also raises fears that the creation of such a distinction may lead to future attacks on nonprofit advocacy rights.

Previously, there was also a concern over an earlier version of the bill regarding language that threatened to weaken nondiscrimination laws by allowing religious-based discrimination. While NCRP is encouraged that such language has been removed from the current version of the bill, the organization remains concerned that some lawmakers may seek to re-insert that language later in the legislative process.

"Congress should resist any future misguided attempts to promote government-funded discrimination in the trappings of faith," added Cohen.

Throughout the CARE Act's development in the last session of Congress, and again this year, NCRP expressed its views about the measure to Senate Finance Committee Chairman Charles E. Grassley, R-Iowa; the committee's ranking minority member, Sen. Max Baucus, D-Mont.; and the bill's lead sponsors - Sens. Rick Santorum, R-Pa., and Joseph Lieberman, D-Conn.

------ Founded in 1976, the National Committee for Responsive Philanthropy is dedicated to helping the philanthropic community advance the traditional values of social and economic justice for all Americans. Committed to helping funders more effectively serve the most disadvantaged Americans, NCRP is a national watchdog, research and advocacy organization that promotes public accountability and accessibility among foundations, corporate grantmakers, individual donors and workplace giving programs. For more information on NCRP or to join, please visit www.ncrp.org or call 202-387-9177.