Lawmakers have, by and large, abandoned a hot and humid Washington, DC for their annual summer recess after roughly seven months of work that failed to produce a single major piece of legislation for President Trump to sign into law. By almost any objective measure, the President and Republican-controlled Congress have been stuck in a tailspin of unproductivity and have not come close to meeting the expectations many had after the November elections handed control of the White House and both Congressional chambers to one party. To make matters worse, when Congress reconvenes shortly after Labor Day, Republican leaders are bracing for a potential firestorm over the debt ceiling and government funding, two issues that must be addressed quickly in order to avoid a government default or shutdown.
Held hostage by this period of inaction has been a much-anticipated comprehensive tax reform bill that President Trump and Republican leaders have pledged to deliver at some point this year. Although White House officials and even some in Congress continue to promote an ambitious timetable for such a bill (i.e., committee mark-ups beginning in late September with legislation finalized by Thanksgiving), the possibility of actually passing permanent, wide-reaching changes to the tax code seems less likely the later it gets in the year.
Tax reform in 2017, then, could take a number of different forms. For example, will Congress push ahead with a fiscal year 2018 budget resolution which includes reconciliation instructions that would allow Republicans to pass tax reform without Democratic support? Possibly, but lawmakers are still far away from finalizing such a budget resolution, and even if they do, the subsequent tax bill would still need to attract 50 Republican votes in the Senate. That means Senate Republican leaders can lose only two Republican votes, a high hurdle they already failed to meet when trying to repeal Obamacare. Given these realities, many in DC believe a temporary tax cut for individuals that would expire after 10 years (along the lines of legislation approved in 2001 and 2003) might be possible before the end of the year, which would leave comprehensive tax reform for another day. Others see a bill that pairs lower individual rates with some limited business tax changes. A long-shot option might be to tie tax reform to an infrastructure spending package to bring Democrats on board.
Although the timing and scope of tax reform remains uncertain, the stakes for charitable gift planners could not be higher. Without any modifications, tax reform proposals currently under serious consideration by the White House and Republican leaders could reduce charitable donations by over $13 billion a year. This figure stems from the consequences of two proposed changes: (1) doubling the standard deduction, which would reduce the number of taxpayers who itemize (and are thus able to take advantage of the charitable deduction) from 33 percent to 5 percent; and (2) lowering the top marginal tax rate for individuals from 39.6 percent to 35 percent, which would further reduce the tax incentive to give money to charities. Add to these changes the possible elimination of the estate tax and stepped-up basis, and it becomes clear that whatever tax legislation ultimately emerges this year will have the potential to greatly impact charitable giving in America. Of course, one solution may be a universal or above-the-line charitable deduction that would benefit all American taxpayers, and CGP continues to aggressively promote this idea on Capitol Hill.
Given all that is at stake, CGP pledges to continue to engage with lawmakers throughout the summer recess and into the fall and winter months. CGP also encourages all members to review our recently-released position statement to better understand the tax reform debate underway and consider attending CGP’s Day on Capitol Hill on Thursday, October 12, 2017, held in conjunction with the National Conference on Philanthropic Planning.
Interested in more advocacy information? Join me for CGP's next Legislative Update on Tuesday, September 12 at 11:30 a.m. EDT.
Let's be heard! Join CGP in Washington for the Day on Capitol Hill Thursday, October 12!