Thursday, November 17, 2011

The Last Season of Giving

"The tax code is too complicated!" cried the Republicans, so they eliminated your charitable tax deductions to give businesses more tax cuts.

You may think I'm over-simplifying things here, but I'm not. That's exactly what they did. They took it from you, and they took it from your community. They even took away the big one, the business and estate donation deductions that really add up when it comes to funding quality of life amenities like museums and zoos and libraries and scholarships and whatever.

See? Tax code is much simpler now that they don't have to worry about all that pesky stuff that benefits the poor and the middle class.

The credit has been on the books in Michigan since 1967, and since 1989 it has given a 50 percent tax write-off for contributions to institutions that the state also pays to support, such as homeless shelters, food banks, community foundations and public universities. Even after giving back 50 cents on the dollar, the donations still reduced the amount of money those institutions required from the state.

The credit gives a maximum of $100 back to a single taxpayer and $200 for a couple filing jointly for eligible donations. Estates, trusts and businesses can get up to $5,000 in credits for their contributions that, in the right circumstances, could cut the cost of a $10,000 gift to $3,300 after state and federal deductions.

Businesses also can get a "super credit" of up to $100,000 for half of all contributions of more than $50,000 to a municipality or certain art, historical or zoological institutions.

Since the tax credit isn't refundable, it only offsets whatever amount a taxpayer owes the state. Last year, the credit cost Michigan $43 million for nearly $100 million in donations, according to state figures and the Community Foundation of Southeast Michigan. But with Snyder's tax reform package, the credit was eliminated, along with others, to pare business taxes and close a $1.5 billion gap in the state budget.

Most people don't realize this is the last year that you will be able to take a tax deduction for giving to "Michigan colleges and universities, public libraries and museums, public broadcasting stations, homeless shelters, food banks and community foundations." As a result, those institutions are stepping up the call to give as much as you can this year, because they simply don't know what is going to happen after the credit goes away. They figure people will still give, but won't be able to give as much as they used to. Add this to other cuts in funding from the state, and we will probably see quite a few of the smaller organizations go under.

But wait! That's not all! To make things even simpler, they eliminated some of your other deductions as well. Your city income tax deduction - gone. Your college tuition credit, which paid an 8% credit to those that had seen tuition increases - gone. Your vehicle donation credit, applicable when giving your old car to certain charities - gone. Certain home improvement credits - gone. Probably others that are escaping my mind at the moment.

This is working so well for the GOP that they want to try it at the federal level, too.

A GOP plan to raise taxes by $290 billion over the next decade would limit deductions for mortgage interest, charitable donations and state and local taxes as part of a deficit-reduction deal. Some workers could also see their employer-provided health benefits taxed for the first time, though aides cautioned that the plan is still fluid.

And just like the state, they will take that money and turn it right over to the wealthy. Just to keep things simple, of course. Capping the itemized deductions would force more people to just take the standard deduction and be done with it. Oh, and we will just make those Bush tax cuts permanent as well. Why complicate things?

"Right now we let people choose between the standard deduction and itemized deductions," said Holtz-Eakin, a former director of the Congressional Budget Office and an economic adviser to President George W. Bush. "All we're saying is we're capping the total amount of the itemized deductions."

Democrats, however, argue that such big reductions in tax rates would result in large tax cuts for the rich, which would be paid for by eliminating tax breaks that primarily benefit the middle class.

Toomey's plan starts with the premise that tax cuts enacted under Bush, and extended through 2012 under President Barack Obama, would be made permanent. The tax rates would be reduced even further under Toomey's plan, giving even more benefits to the wealthy, according to an analysis of Toomey's plan prepared by Democratic congressional aides.

Hopes are this doesn't have a chance of passing Congress. Because it does raise revenue, some Republicans are rejecting it outright, as they continue their crusade to never compromise, ever, on anything. We are at the point where their obstructionist tendencies just may save us all in the end.

Just to be safe though, give what you can this year. With our state telling people to turn to charity even as they move to make cuts to those charities, it's more important than ever.