Welcome Claudia Y.W. Herrold Senior Vice President, Communications - PowerPoint PPT Presentation

Welcome Claudia Y.W. Herrold Senior Vice President, Communications & Public Policy Philanthropy Ohio @philanthropyOH #OHphilTalks

Background John Mullaney Executive Director The Nord Family Foundation @philanthropyOH #OHphilTalks

Taxes and Families Elaine Maag Senior Research Associate The Urban Institute/Tax Policy Center @philanthropyOH #OHphilTalks

How Tax Policy for Low-Income Families Fits into Tax Reform Understanding the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) in the Context of Charitable Giving June 26, 2015 Elaine Maag Philanthropy Ohio Webinar

Federal Income Tax System  Tax system serves two functions - Collects money to fund government - Provides support to low-income families  Earned Income Tax Credit  Child Tax Credit  Badly in need of reform - Doesn’t collect enough money to fund government at legislated levels - Complicated www.taxpolicycenter.org 4

Why is Tax Reform So Hard?  Goal is to have a tax system that is fair, efficient, and simple - Little agreement on what the goals mean - Very visible trade-offs between these goals  Fairness is often measured in terms of the distribution of the tax benefit - Little to no consideration given to secondary effects, e.g., who benefits from the charities being supported by a charitable deduction www.taxpolicycenter.org 5

Charitable Deduction Gets Attention  Third most expensive itemized deduction  Tax benefit is not progressive “Tax provisions favoring one activity or another or providing benefits to a limited number of taxpayers create complexity and instability, impose large compliance costs, and can lead to an inefficient use of resources” Tax Reform Panel, 2005 www.taxpolicycenter.org 6

Understanding the Distribution of the Charitable Deduction www.taxpolicycenter.org 7

Charitable Deduction: Average Benefit and Proportion of Tax Units with Benefit (2015) $3,500 100 90 $3,000 80 $2,500 70 60 $2,000 50 Average Benefit $1,500 Average Benefit for Tax Unit with Benefit 40 Percentage with Benefits 30 $1,000 20 $500 10 $0 0 Lowest Second Middle Fourth Top Quintile All Quintile Quintile Quintile Quintile Source: Tax Policy Center Table T13-0079. www.taxpolicycenter.org 8

Future of Charitable Deduction  Expansion of any program in the current environment difficult  Need to look for allies even to protect the deduction from elimination  Might find those allies among low-income advocates  Distribution of EITC much more progressive, so expansions to it can offset less progressive changes www.taxpolicycenter.org 9

Tax Credits for Low-Income Families  Substantial assistance provided to low-income families with children via the EITC  EITC benefits are on par with SNAP (formerly Food Stamps) - Minor expiring provisions (some marriage penalty relief after 2017)  Also benefit from CTC - Major expiring provision – highly targeted, not very expensive – Reduced refundability threshold (expires after 2017) www.taxpolicycenter.org 10

How the EITC Works www.taxpolicycenter.org 11

Distribution of EITC www.taxpolicycenter.org 12

Distribution of Child Tax Credit www.taxpolicycenter.org 13

Any Expansion to the Charitable Deduction Likely Linked to Offsetting Reform  Little appetite to expand benefits by many in Congress without offsetting changes  Has happened in the past – e.g., discussion of carbon tax  Notable in recent reform efforts – look to low- income policies to make distribution tables more neutral  Advocates for low-income programs have supported saving charitable deduction in past when elimination was proposed www.taxpolicycenter.org 14

THANK YOU For more information please contact: Elaine Maag EMaag@urban.org View many studies on tax expenditures at www.taxpolicycenter.org

@philanthropyOH #OHphilTalks ABC L ITE S Questions/Discusson EPTEMBER 9 1:00 - 3:00 PM ET David Lindberg, Chief Financial Officer, Council of Michigan Foundations Terri Johnson, Associate Director, GIFT, Indi ana Philanthropy Alliance Steve Phallen, Vice President of Finance and Administration, Philanthropy Ohio

Connect with us! Facebook.com/philanthropyohio @philanthropyOH Linkedin.com/company/philanthropyohio philanthropyohio.org

Upcoming Programs • Arts and Culture Peer Group, Northeast Ohio Monday, June 29 | Cleveland • Honoring your family’s legacy alongside communities for a lasting impact Thursday, July 9 | Webinar • Funding General Operating Support Tuesday, July 14 | Webinar • Community Project Funds Wednesday, July 22 | Webinar philanthropyohio.org/events @philanthropyOH #OHphilTalks

_ September 16-18, 2015 The Westin Cincinnati Hotel

TH THAN ANK Y K YOU! OU!