October 27, 2005 | Read Time: 1 minute
TAX WATCH
A presidential advisory committee expects to recommend soon that the government make big changes to the federal tax code — and eliminate the opportunity for many Americans to take deductions for charitable gifts.
The committee was formed by President Bush to advise his administration on how to overhaul and simplify tax laws and will make a final report to the Treasury Secretary on November 1. Observers do not give the committee’s ideas much chance to be passed by Congress because they would require sweeping changes to the tax code.
The President’s Advisory Panel on Federal Tax Reform plans to recommend that the government allow all taxpayers to write off charitable gifts on their federal income tax returns. Currently, only people who itemize on their returns are eligible to take charitable-tax deductions. But the committee would allow taxpayers to write off only the portion of their gifts that exceeds 1 percent of their income, which for many people would wipe out the opportunity to take the deduction, and would reduce the value of the deduction for many others.
For example, under the proposal, a person with $50,000 in income could take charitable deductions only for gifts that exceeded $500 a year. Under current law, a person with $50,000 in income who itemizes can generally write off donations of any size.
The committee’s proposal would be bad news for charities that rely on small donations because it would remove an incentive for some of their contributors.
The proposal is expected to be included in two separate tax plans that the advisory panel will recommend to the administration. One plan would simplify the current federal income tax system; the other would revamp the current system and combine it with a tax on the goods and services companies buy.
