In its recommendations, the White House deficit commission suggested lawmakers should slim down itemized, tax-deductible contributions to colleges and other charities with a nonrefundable tax credit. President Barack Obama has proposed reworking the tax code when it comes to charitable giving, which has struck fear into universities and other nonprofit groups that rely on donors’ kindness — and the subsequent tax breaks — to keep the lights on. In the budget he released early last year, Obama proposed raising more than $300 billion for the health care plan by capping charitable contributions on high-income families.
At the time, university and other nonprofit officials expressed their frustration to Roll Call. “Traditionally, the charitable deduction has been the cornerstone of philanthropy,” a Stanford University lobbyist said. Nonprofit executives are already making noise about the proposal. Caring to Change Director Mark Rosenman told the New York Times that the idea was “patently absurd.”
But depending on the details, a source in the D.C. foundation community indicated this week that the nonprofit world may be open to a compromise. “There’s room for conversations about that,” the source said.
Employer-Sponsored Health Care $568.3 billion
Insurance companies are already keeping a watchful eye on how Members might remake incentives for employer-based health care in any coming tax overhaul.
Workers whose employers offer health care now pay for their portion of premiums with pre-tax earnings. The White House’s deficit commission recommends reworking the system with a complex formula that health care providers worry may lead to companies dropping their offerings.
“The big, overarching thing is we don’t want to unravel the employer-based health care system,” an industry source said. “In the health care law, if they talk about a complete repeal, we would not support it. ... The employer-based system is working well for 160 million Americans.”
Another insurance industry source said the business community likely would oppose reworking how employees’ insurance costs are paid for.
“It’s an employer deal. They get the exemption,” the source said.
401(k)s and Other Defined-Contribution Retirement Plans $184.3 billion
Gone are days of “defined-benefit” pension programs, which have been replaced in recent decades with “defined-contribution” retirement accounts such as 401(k) plans. Using these investment vehicles, employees typically set aside a percentage of their pretax earnings to be invested in the stock market for retirement.
President Barack Obama’s deficit-reduction committee recommended doing away with the alphabet soup of “multiple retirement account options with different contribution limits” in favor of a consolidated system.
After the proposal was released Dec. 1, the head of the American Society of Pension Professionals and Actuaries suggested that the plan stood to blow up the system employees use to save for retirement. Executive Director and CEO Brian Graff said in a statement to PlanSponsor.com that “We urge Congress to carefully consider the impact of the Commission’s recommendations on tax incentives for employer-sponsored retirement plans.”
The nation’s largest retirees’ lobby also announced that it would fight an overhaul of the retirement system. AARP lobbyist John Rother claimed the recommendations “would actually increase the health and economic insecurity of millions of Americans."
“AARP believes strongly that the commission and our elected leaders need to more fully assess the impact of its recommendations on real people,” Rother said.