WASHINGTON, D.C. — Elder Dallin H. Oaks told the U.S. Senate Finance Committee Tuesday morning that proposed "impairments" of the charitable tax deduction in order to increase tax revenues available for government expenditure are not religious, political or even economic issues.
Rather, he said, they pose "a question about the nature and future of America."
Elder Oaks, a member of the Quorum of the Twelve of The Church of Jesus Christ of Latter-day Saints, was invited to testify at the committee's hearing on charitable giving by ranking committee member Sen. Orrin Hatch, R-Utah. He was accompanied by The Most Reverend Timothy C. Senior, an auxiliary bishop of the Catholic Archdiocese of Philadelphia, and Russell Moore, dean of Christian Theology and Ethics at the Southern Baptist Theological Seminary, who Elder Oaks said had indicated their full support of the language of his testimony.
The standing committee, generally considered one of the most powerful committees in Congress, meets regularly to consider budgetary, taxation and other general revenue measures. At Tuesday's meeting committee members were gathering information and input from a number of nationally prominent experts in order to respond to national budget proposals calling for a cap on charitable and other deductions, or the elimination of the charitable deduction altogether with the option of replacing it with a credit based on a complicated formula.
The charitable tax deduction, Elder Oaks said, "is vital to the private sector that is unique to America." It provides much of the funding for countless organizations, both religious and charitable, that "are responsible for tens of millions of jobs and innumerable services that benefit our citizens at every level."
"I speak of educational institutions, hospitals, social welfare agencies and innumerable other organizations ministering to the needs of children, youth, the aged, the poor and citizens generally," Elder Oaks said. "The financial well-being of this private sector is dependent upon private contributions that qualify for the charitable deduction. And the impact these private institutions have on those they serve is magnified by the millions of volunteers motivated by the ideals they pursue."
As an example, he referred to the collective benevolent efforts of a wide variety of non-profit organizations in the aftermath of Hurricane Katrina in 2005. The LDS Church alone "aided the cleanup efforts with almost 3,000 tons of emergency supplies, over $13 million in cash and use of heavy equipment, and its members gave more than 42,000 man-days of service."
Other non-profit organizations, he noted, gave more than $3.5 billion in cash and in-kind donations in support of relief efforts.
"The private sector of charitable activity is almost unique and surely uniquely valued in America," Elder Oaks said. "And we all understand that its activities are funded by private donations produced or importantly stimulated by a charitable deduction that reduces the donor's taxes.
"We are grateful for the charitable deductions, which encourage donations to churches and other charities," Elder Oaks continued. "The effect of this tax benefit is built into the financing of charitable enterprises that are vital to our nation, and it is a significant and wise support of the private sector."
As a result, Elder Oaks concluded, "the charitable deduction should remain unimpaired, not just for religions and their unique role but for the benefit of the entire private sector of our nation. The private non-profit and non-government sector has always been an important counter-weight to the powers and potentially repressive influence of governments at the local, state and national level. The private sector is essential to preserving pluralism and freedom in our nation. Don't reduce the charitable deduction!"
During the question and answer portion of the session, Elder Oaks also expressed his concern with the message that would be sent by any impairment or limitation to the deduction. "If the charitable deduction is modified in substance — not in the details, but in the substance — that will be a teaching message that charitable works are less important in our view than the works of government. It is that message that I speak against."
To read Elder Oaks' full remarks, click here.
Hatch made introductory remarks to the session, during which he noted that "the charitable contribution begins with the first dollar given. We should rejoice that we live in a country where people of all income groups give generously to charity."
He added that the charitable giving deduction is "the only deduction that encourages you not to spend or invest your income, but to give it away," and concluded that "we curtail the charitable tax deduction at our peril."
To read Hatch's introductory full remarks, click here.
Also addressing the Finance Committee during the hearing were:
Frank Sammartino, a 20-year veteran with the Congressional Budget Office, and currently that organization's assistant director for tax analysis. His remarks articulated how the CBO has looked at 11 different options for reforms to the charitable deduction. He indicated, however, that it was not his place nor the place of the CBO to make specific recommendations.
Dr. Eugene Steuerle, is a noted economist and the Richard B. Fisher Chair and Institute Fellow at The Urban Institute, a Washington, D.C.-based "think tank" focused on nonpartisan economic and social policy research. During Steuerle's brief presentation he described a number of different adjustments that could be made to the charitable deduction that he felt would both maintain charitable giving and still help reduce the budgetary shortfall. While he acknowledged the benefits to society of the deduction as it now functions, he said "we have to deal with the budgetary shortfall now. There's no better time for dealing with this than right now."
Brian A. Gallagher, president and CEO of United Way Worldwide since 2002, said that after 30-plus years working with benevolent donors in the private sector, "I know why people give." He said that charitable causes are reliant upon large donors for a significant portion of their income, and if they are limited in what they can donate it will definitely have impact on the bottom line for all charities. "At a time when all manner of government programs are being cut, decreasing the amount of donations going to charities is the wrong thing to do," Gallagher said.
Roger Colinvaux, associate professor at The Catholic University of America, Columbus School of Law, is a nationally recognized expert on tax matters relating to nonprofit organizations. During the session he spoke mostly about the deduction as a matter of law. He recommended that an effort be made to "de-link the deduction from tax exemption." While this would be a difficult process, he acknowledged, it would "force more conversation about what the deduction is for, and allow us to look at which sectors of the deduction are worthy of support."
Watch and read the testimonies of members of the Senate Finance Committee and others,
which are also posted on the Senate website.