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

Welcome

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Claudia Y.W. Herrold

Senior Vice President, Communications & Public Policy Philanthropy Ohio

Background

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John Mullaney

Executive Director The Nord Family Foundation

Taxes and Families

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Elaine Maag

Senior Research Associate The Urban Institute/Tax Policy Center

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

www.taxpolicycenter.org 4

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 5

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 6

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 7

Understanding the Distribution of the Charitable Deduction

www.taxpolicycenter.org 8

10 20 30 40 50 60 70 80 90 100 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Top Quintile All

Charitable Deduction: Average Benefit and Proportion of Tax Units with Benefit (2015)

Average Benefit Average Benefit for Tax Unit with Benefit Percentage with Benefits

Source: Tax Policy Center Table T13-0079.

www.taxpolicycenter.org 9

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 10

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 11

How the EITC Works

www.taxpolicycenter.org 12

Distribution of EITC

www.taxpolicycenter.org 13

Distribution of Child Tax Credit

www.taxpolicycenter.org 14

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

THANK YOU

For more information please contact:

Elaine Maag EMaag@urban.org View many studies on tax expenditures at www.taxpolicycenter.org

ABC L ITE S 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

Questions/Discusson

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Connect with us!

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Upcoming Programs

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• 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

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September 16-18, 2015 The Westin Cincinnati Hotel

TH THAN ANK Y K YOU! OU!