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Boustany Statement: Joint Hearing on Food Banks and Charitable Giving

November 19, 2009

Chairman Lewis, thank you for yielding time. 

I want to join with my colleagues in saying that as we approach the holiday season, we have grave concerns about how these difficult times are generating unprecedented need for life’s basic necessities: food, clothing, and shelter. 

I also want to commend the work that the organizations testifying today – as well as countless others – do in trying to meet these needs with limited resources.  You perform a critical role in our civil society, and we are grateful for your selfless efforts.

When considering what role the federal government should play in helping food banks and other charities provide assistance to the less fortunate, I think the first rule should be, “do no harm”.

Mr. Chairman, unfortunately this Congress and this Administration are pursuing an agenda that would violate that rule – by advancing tax increases that would reduce the incentive for charitable giving and by imposing new burdens and mandates directly on charities and foundations.

President Obama’s budget proposal to cap the value of itemized deductions at the 28% tax rate, while increasing the top rate to 39.6%, would have a detrimental effect on charitable giving.  According to an analysis by Harvard economist Martin Feldstein, President Obama’s proposal would transfer more than $70 billion over ten years from charities to the federal government.  He says, quote, “high-income taxpayers affected by the rule change are likely to cut their charitable giving by as much as the increase in their tax bills.”  End quote.  This means that the Obama budget would effectively impose an 11.6% tax on charitable donations made by people in the top tax bracket.

Mr. Chairman, I ask unanimous consent to enter Dr. Feldstein’s analysis into the record.

Add on top of this the 5.4% surtax that the House Democrats want to impose to pay for their government takeover of health care – against which taxpayers could not deduct charitable donations – and the combination of the President’s budget and the House-passed health care bill would impose a 17% tax on charitable donations made by singles earning over $500,000 and couples earning over $1 million.

And that’s no small charity tax.  As opposed to what some believe, high-income Americans are extremely generous with their money.  According to 2007 IRS data:

  • 46% – almost half – of charitable contribution deductions are taken by households earning over $200,000;
  • more than one-third of charitable deductions are taken by households earning over $500,000; and
  • 29% of charitable deductions are taken by people earning over $1 million.

These donations are in danger of being taxed if the Majority gets its way.

In addition, very little attention has been paid to the fact that under the employer mandate in the House-passed health care bill, charities – including food banks – fall under the definition of “employers”.  This means charities that do not provide government-approved health insurance to their employees could face a tax of up to 8% of payroll.  Given that 36% of nonprofits do not currently provide health insurance – including almost 50% of those with fewer than 50 employees – and given that most charities are stretched very tight these days, this new payroll tax could be the difference between being able to continue to serve the needy and having to shut their doors.

And because charities and foundations are tax-exempt, they cannot use the small employer tax credits included in the Democrats’ bill to help them meet this new burden.  Without relief, struggling charities and those they serve face great uncertainty from Washington.

Ronald Reagan famously said that “the government’s view of the economy could be summed up in a few short phrases:  If it moves, tax it.  If it keeps moving, regulate it.  And if it stops moving, subsidize it.”  Well, now we learn that the Majority’s view of philanthropy can be summed up in a few similar phrases:  If it gives, tax it.  If it keeps giving, impose a mandate on it.  And if it stops giving, subsidize it.

I hope today’s hearing will serve as an important first step to promoting the good work our charities do.

Thank you, Mr. Chairman.  I yield back.