In 2011, the nation's biggest charities swung into action to oppose President Barack Obama using limits on tax deductions to help pay for a jobs bill. Warning that such a move would hurt charitable giving, they prevailed, and Democrats looked elsewhere.
A year later, deductions are again in the cross hairs as Washington hunts for a big deal to avert tax increases and spending cuts. After years of successfully fending off such efforts, nonprofits worry this time could be different.
"What we're up against now is a mega-fiscal issue," said Chris Hansen, president of the Cancer Action Network, the advocacy arm of the American Cancer Society. "You worry that they will miss some important facts as they desperately try to come up with something that they can compromise on."
Lobbies representing charities, home builders and oil firms are among those rushing to reverse a growing Washington consensus that tax deductions should be mined to raise fresh revenue. The result is a clash between two political priorities: cutting the deficit and preserving popular tax breaks, including deductions for charitable giving and mortgage-interest payments.
Americans will pay roughly $40 billion less in taxes in 2012 due to the charitable deduction they take, according to Congress' Joint Committee on Taxation. That could be hard for lawmakers and the White House to ignore as they search for ways to cut future deficits.
There is no specific plan to eliminate deductions for charitable giving in current talks. Instead, proposals that have been floated focus on capping overall deductions.
The White House in the past has proposed limiting deductions to no more than 28% of income for families making $250,000 or more. Republicans including former presidential nominee Mitt Romney have suggested limiting deductions to a specific dollar amount.
Others have suggesting a "haircut" option, letting taxpayers claim, for example, 80% of their current deductions.
Source: Wall Street Journal | NAFTALI BENDAVID