Baucus and Camp Take Their Tax Reform Show on the Road

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July 8, 2013; Politico


The tax reform road show is underway; tickets are free, and you don’t need to flick your Bic lighters to acknowledge the provisions you might support. Senate Finance Committee chair Max Baucus (D-MT) and House Ways and Means Committee chair Dave Camp (R-MI) plan to spend their summer touring the nation asking for ideas about tax reform. The idea, according to Baucus, is to get outside of the Beltway “bubble” to hear what ordinary Americans want in tax reform.

Their first stop was the 3M Innovation Center in Minnesota, chosen apparently because 3M has told Washington that it is open to trading all corporate tax breaks in exchange for a corporate tax rate significantly lower than the current 35 percent. Baucus and Camp are singing from a bipartisan score at this point, though they generally took only preselected questions. Baucus made a single exception, asking for one unscripted query that turned out to be on whether there was any guarantee that tax reform would actually happen, which neither Baucus nor Camp could assure.

Baucus and his committee’s ranking member, Orrin Hatch (R-UT), have pledged that they will consider tax reform from a blank slate, sort of a zero-based budgeting approach to tax reform. Essentially, every tax break to be protected will have to be justified and defended as though it were completely new. In the stop after 3M, they heard about one tax incentive that a particular business wanted retained.

Baucus and Camp visited a firm smaller than 3M, Baldinger Bakery, which recently built a new $30 million facility with $4 million in subsidy funds from the New Markets Tax Credit. A lobbyist for the New Markets Tax Credit Coalition, Bob Rapoza, quickly issued a statement defending the NMTC as “an effective incentive that has moved investment capital from the sidelines into some of the most economically distressed rural and urban communities in America.” Already, another bipartisan, bicameral duo—Senator Jay Rockefeller (D-WV) and Rep. Roy Blunt (R-MO)—have introduced legislation to permanently extend the New Markets Tax Credit, regardless of tax reform.

Although nonprofit leadership organizations have seemingly focused on the charitable tax credit as the be-all and end-all of nonprofit concerns about tax reform, the New Markets Tax Credit is a high priority for many nonprofit community development entities. NMTC subsidies have helped a wide variety of nonprofit and other socially beneficial projects, including the construction of 14 affordable homes by Omaha Habitat for Humanity, a seafood waste processing plant for the Gulf Coast Agricultural and Seafood Co-op in Alabama’s Bayou LaBatre, the development of a facility for homeless women and children by the Phoenix Rescue Mission, the construction of a social service “campus” in Los Angeles run by the Children’s Institute, construction of a new health clinic for the Generations Family Health Center in Willimantic, Connecticut, and dozens of others.

The nonprofit stake in tax reform is hardly just limited to the charitable tax deduction. As they track the Baucus and Camp roadshow around the nation waving their lighters at every mention of the word “charitable,” nonprofit leadership organizations might be well advised to remember that there are other nonprofit issues in play as Congress rethinks the contents of the tax code.—Rick Cohen

  • Eugene Patrick Devany

    One of the many problems with the charitable deduction is that it encourages the transfer of investments from job creating business to charity with a net loss of jobs. It would be far better to limit the $40 billion in charitable deduction tax expenditures only to those charities which are willing to sponsor 2,000,000 new jobs with the $40 billion. This would help the people that need work and continue to provide incentive to large donors (not that they need it) to give to public charities willing to sponsor new jobs for U.S. workers in need.

    In 2000 the nonprofits (excluding churches) had twice the net wealth of half the U.S. population and today the charities have eight times the net wealth of the poor and lower middle class. U.S. jobs are needed and charity begins at home – especially when it is funded by tax subsidy.

  • Jody Wiser

    This is a truly self-serving and anti-common good set of ideas.

    Charitable giving can easily stand on its own feet just as political giving does. Further, if we all give up the tax deduction, there will be more federal funds available with which to buy non-profit services. Trust in yourselves and the charitable instinct of Americans. After all, did you ever see a donation for $134,475 million because the donation would save the taxpayer $34,475 in taxes? No, the donor will most likely continue giving the same $1 million, $10,000, $1000, $100 or $10 they give now.

    The New Market Tax Credit program does some decent things. There is no doubt about it. However, it does it very inefficiently. Little of the money is getting to the projects. Imagine a $100,000 project. The American public is giving up $39,000 in revenue, but typically, only $17,000 gets to the good cause. $22,000 goes to those who market these deals and loan money. The NMTC is a job creator, I suppose, because of the number of dealmakers, lawyers and bankers have to get involved. I am told that at a typical closing there are as many as 96 different documents to be signed and a roomful of dealmakers. But the taxpayers’ would get far more for their bucks if they simply made two grants of $17,000 to two different projects.