Committee on Ways and Means, Subcommittees on Human Resources and Select Revenue Measures, 7-14-01 Testimony

Statement of the Hon. Jennifer Dunn, a Representative in Congress from the State of Washington

Testimony Before the Subcommittee on Human Resources and
Subcommittee on Select Revenue Measures
of the House Committee on Ways and Means

Hearing on H.R. 7, the "Community Solutions Act of 2001"

June 14, 2001

Americans in communities across the country give their time, talents, and money to help worthy causes. Americans have been and always will be generous people. No matter the social or economic burdens, Americans strive to make a difference to help those in need—not because they must, but because they care. In doing so, they strengthen our communities and nation. As Alexis de Tocqueville wrote in the 1800s, our tradition of a strong commitment to private charities is a model for the rest of the world.

According to a study by the Independent Sector, the average household donated approximately $1,075 in 1999. Americans’ generosity is significant, but by changing our tax code we can do more to encourage people to give.

Our tax code encourages charitable contributions by allowing people who itemize to deduct those donations each year. But the deduction is unavailable to two-thirds of all taxpayers, nearly 85 million Americans, who do not itemize. The tax code further limits charitable donations by effectively imposing taxes on large gifts and by treating gifts of property and cash differently.

I have introduced legislation that will reward people for their generosity and spur greater giving. The Neighbor to Neighbor Act follows President Bush’s lead by expanding the charitable deduction to non-itemizers. Additionally, the Medical Research Investment Act will channel more money to help discover cures and treatments for horrible diseases such as Parkinson’s and leukemia.

The Neighbor to Neighbor Act has four main provisions:

It extends the charitable deduction to non-itemizers equal to the allowable standard deduction. For example, an individual non-itemizer can deduct up to $4,550 of charitable contributions.

It allows individuals to donate to charity up to April 15th of the new taxable year and apply those donations against the previous year's taxable income.

It also equalizes property and cash donations. Under current law, the amount of the allowable deduction for property is 30% of an individual’s income; this will rise to 50%, the amount allowed for cash contributions.
It eliminates the 50% income limitation for the contribution of money from an IRA so that more resources reach the charity before being taxed.

These changes will strengthen all charities. According to a recent study, expansion of the deduction to non-itemizers would create 11 million new donors and could lead to an additional $14.6 billion in contributions

In my home state of Washington, charities could see a $1.7 billion increase in donations over the next five years. That is why over a dozen Washington state based non-profit organizations have endorsed my legislation

Expanding the charitable deduction to include non-itemizers will also provide broad-based tax relief to low and middle income Americans. These are the people who overwhelmingly use the standard deduction.

The second measure, the Medical Research Investment Act (MRI Act), will improve our public health by encouraging donations to medical research groups. Under the current tax code, deductible charitable cash gifts to support medical research are limited to 50% of an individual’s adjusted gross income. The Medical Research Investment Act simply increases the deductibility to 80%.

In addition, the Act allows people to donate stock without being penalized. Under current law, an individual who would like to donate $1,000 to a charity has to sell $1,400 of stocks to pay the taxes. In my bill, the donor would not have any capital gains taxes.

These seemingly small tax changes will have an enormous impact on funding for medical research. According to an independent study conducted by PriceWaterhouseCoopers, the MRI Act could lead to an additional $180 million donated to medical research per year.

The Neighbor to Neighbor Act and the Medical Research Investment Act each enjoy strong support from the charitable community. Several of the provisions in the Neighbor to Neighbor Act are found in H.R. 7. I am hopeful my colleagues will help ensure that medical research is also included.

It is important for us to remember that the American social safety net is woven with two distinct threads – government assistance and private charity. Although private charity can never replace government assistance, lawmakers should endeavor to craft policies that will tap into the generosity of average Americans. I strongly believe both of these bills will accomplish that noble goal.