08 September, 2005

Congress, Katrina and Chastising Consumers

Everywhere I turn I am being urged to help victims of the hurricane. Banner ads on websites, large buckets in bars, endless lists of things to send to the newly displaced persons. If I don't want to add a dollar to my grocery bill or click $2.50 in from PayPal (am I the only one who wants a cookie recipe everytime I give $2.50?), I can send teddy bears, baked beans and toothbrushes through any one of the scores of aid groups soliciting donations.

And I'm fine with that. Except that Congress isn't.

Most people are not aware that there are proposals pending in Congress to cap the charitable deduction for personal donations of goods other than cash at $500.00 per household.

It's one of those sneaky, under-the-wire things Congress gets to do, because dry-as-dust tax law isn't as sexy as Neverland Ranch. Tax deductions?! *snore* Wake me when Geraldo is crying in Aruba.

But it's there, it's real and it could cost millions of dollars to generous American families and hundreds of millions of dollars to non-profit aid groups like Goodwill Industries and the Salvation Army. Donations of high-dollar items such as old cars, boats, washers and dryers and television sets can be expected to slow to a trickle without the tax incentive. Middle-class Americans are very generous people as a whole, but the myth of their unlimited solvency is just that-a myth. Once it becomes more profitable to sell the used washer on eBay, that's exactly what will happen, because lights still have to be kept on and kids still need new shoes. Even if Mom and Dad weren't displaced by a hurricane.

I've no doubt that Congress needs more money in the federal budget. They've created an expectation of limitless weath that needs to be met somehow, some way. Yet this new crafty piece of dry toast is one of the most anti-American things to come down the pike in awhile. It punishes the poor and curtails the generosity of the middle class.

Please contact your Congresspeople to urge them to stop this stupidity. It may be the most worthwhile thing you do to advance the cause of the poor.


I first heard about this on my last visit to the Goodwill Store. It came to mind again last night, and I thought I'd put it out there today. I've researched the actual proposals, spent about an hour bouncing around on the phone between the IRS and the Dept. of the Treasury (two organizations known for their helpfulness) and left messages with for Lisa Cunard in Goodwill's Office of Public Policy.

Pending a return call from Ms. Cunard, the information I have been able to uncover is that surprise Feds have been holding hearings into Non-profits and are expected to introduce proposals at a later date. Charles Grassley of Iowa seems to be leading the charge. He had this to say in April:

Last week the Commissioner of the Internal Revenue Service came out with preliminary
findings on the tax gap. The news is not good. We continue to have a tax gap of well over $300
billion a year. That's the difference between the amount of tax voluntarily paid and the amount
of tax that should be paid. Like a loaf of bread, the tax gap is made up of many slices. There
isn't one specific problem or issue that makes up the whole. If we're going to begin to close the
tax gap, we'll do so one slice at a time.
In one particular area, we've become familiar with the problem of individuals taking big
tax deductions based on estimates--often pie-in-the-sky estimates--for gifts of closely held
stock, in addition to real and tangible property that is given to charity. What we see too often is
the charity receiving a very small amount of support, at best, from this kind of gift, at the same
time the taxpayer gets a tremendous benefit from the tax deduction

This puts me at considerable unease. It's a socialist proposal for the Government to determine the value of property and goods; such determination needs to be made by the market forces. Senator Grassley implies that a charity's use of donated items should be the sole determining factor of the items' worth, whereas consumers donating the item routinely use fair market value or replacement cost in making their determination. My personal example would be library books. I am known to donate thousands of dollars of nearly-new hardcover and paperback books to the Public Library. To me, fair market value would be the rate at which one could purchase that same book in a used book store (usually half the cover price.) However, the library routinely sells these books for $1.00 at their friends of the library sales. Grassley's determination would set the value of the books at $1.00, and claim that my higher deduction is lost money to the federal government. I personally believe, though, that if the library gains the publicity value of having frontlist titles at its sales and drawing a larger crowd, they have gained the additional funds in kind. That's the murky area that Congressional proposals seek to eliminate with this nonsense. Frankly, I'll sell the books to a used book store and gain the realized profits from now on, if this law is enacted. I like doing good and helping out, but if some stuffed shirt in Washington is going to look disapprovingly over my shoulder I think I'll do better by sticking to my own business.


At 1:39 PM, September 08, 2005, Blogger John H said...

This really is a STEALTH proposal..I can't find any info in NY Times or MSNBC about this. Who is behind this? The Goodwill Site you linked doesn't offer any specifics about the bill other than that we should oppose the thing (agreed..). Do you know any other news sources writing about this info?


At 2:27 PM, September 08, 2005, Blogger Kat Coble said...

I've looked and looked. It's apparently not 'news' yet, since Grassley is holding his cards close to the vest. The pre-bill hazy-days-of-summer hearings appear to be all that's going on now. I've linked to another non-profit that has information, as well as to the PDF of Grassley's opening remarks at the hearings in April.

I wouldn't be surprised if the post-Katrina charitable donations don't kick Grassley's bill in the teeth. Now is the time to get press on this, when people are still feeling the need to give. Anything to nip the thing in the bud, as far as I'm concerned.

I tell you, this is the kind of krep that makes me really mad at Republicans. The "tax gap" is like the unicorn of public funds. Let's try some "tax cuts" before we start limiting the generosity of the middle class.

At 9:04 PM, September 08, 2005, Blogger Kleinheider said...

Outstanding post, Katherine!

At 9:25 PM, September 09, 2005, Blogger Mystery Girl said...



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