Tax Quote of the Week
[Responding to Chancellor of the Exchequer, Gladstone's question as to the practical uses of electricity:] "Why, sir, there is every probability that you will soon be able to tax it!"
-- Michael Faraday
Haiti Tax Deduction Passed
On January 20, 2010, the House passed H.R. 4462. This bill permits Haiti relief gifts from January 12 to February 28 of 2010 to be deducted on 2009 tax returns.
Following the House passage on the unanimous voice vote, the Senate acted quickly on January 21, 2010 to pass the bill. President Obama is expected to sign the bill within the next week.
Senate Finance Chair Max Baucus (D-MT) stated, "Today, Congress unanimously agreed to extend the tax deadline for charitable giving so Americans can continue to help the relief efforts in Haiti."
The Ranking Republican on the Senate Finance Committee, Charles Grassley (R-IA), continued, "Americans give generously to disaster relief and I hope this extension encourages them to give even more. I also hope Americans will make sure the charities they choose are above board. People should be careful to give only to groups they recognize and trust."
The bill permits cash gifts (not property gifts) from January 12 to February 28 of 2010 to be deducted on the 2009 tax returns. The gifts must be "for the relief of victims in areas affected by the earthquake in Haiti on January 12, 2010." All qualified charities may receive the gifts, so long as they use the funds appropriately for Haiti relief.
Because many individuals have made gifts using their telephone, a deduction is also permitted for cash gifts by phone during the above dates. For a telephone gift, donors should retain the telephone bill with the name of the charity, the date of the gift and the amount of the contribution.
Editor's Note: While some charities may assist donors by issuing receipts "for the relief of victims in areas affected by the earthquake in Haiti," donors should also make a written note of that fact on receipts or a personal memo. Please note that you must receive a receipt for gifts of $250 or more before filing your 2009 tax returns.
Healthcare Reform on Hold
For the past two weeks, Senate and House negotiators have been working on a conference healthcare bill. However, following the election of Republican Scott Brown in Massachusetts to fill the seat of the late Sen. Edward Kennedy, there no longer are the required 60 Democratic votes in the Senate. As a result, the Senate and House conferees have placed the healthcare conference bill on hold.
Following the Massachusetts election, there was discussion in Washington and the nation about the potential for the House to pass the Senate bill. In late December, the Senate passed the healthcare bill with the required 60 votes. If the House were to pass the exact Senate bill, it would be sent to President Obama for his signature.
Speaker Nancy Pelosi (D-CA) has been in discussions with many members of her party. She stated on January 21, 2010, "In its present form without any change, I don't think it is possible to pass the Senate bill in the House." Speaker Pelosi indicated that many House Democrats oppose the Senate plan to pay for healthcare reform with a 40% excise tax on "Cadillac" healthcare plans.
House Democrats in districts with significant union membership have received many calls and letters opposing the Senate bill with the excise tax. Some union members have negotiated agreements with substantial healthcare benefits. Many individuals believe that the 40% excise tax on the insurers would be passed through to middle-income taxpayers as higher premiums.
Editor's Note: The healthcare reform process now returns to the House Ways and Means Committee. Members are discussing the possibility of dividing the healthcare reform bill into separate areas. For example, there could be one bill on patients' rights, a second on healthcare insurers and a third to cover medical liability reform. Given the fact that this is now an election year, it will be challenging to pass major legislation before the November elections.
Budget Commission Debate Continues
Majority Leader Harry Reid (D-NV) has proposed a $1.9 trillion increase in the federal debt limit. This would increase the authorized federal debt from $12.4 trillion to $14.3 trillion.
On Jan. 21, 2010, Senate Budget Chair Kent Conrad (D-ND) introduced a bill that would create a Budget Commission. Sen. Conrad proposed combining the $1.9 trillion increase in the debt authorization with a new Budget Commission. He was joined in the proposal by the Ranking Republican on the Senate Budget Committee, Sen. Judd Gregg (R-NH). The Budget Commission would be made up of eight Democrats, eight Republicans and two appointees from the White House. The Commission would propose spending limits and tax increases that would be voted on without amendment by the Senate.
Sen. Max Baucus (D-MT) opposed the concept. He notes that the Budget Commission would have the power to make recommendations for cuts in Medicare, Medicaid and Social Security. In the view of Sen. Baucus, this process should only be done "through the regular order."
Vice President Biden and the White House were also involved this week. The White House discussed the possibility of creating the Budget Commission through an executive order. However, Sen. Gregg noted, "The creation of a Fiscal Action Commission by executive order would be like a car without an engine." Sen. Gregg observes that the White House Budget Commission would not have power to force any votes on specific legislation. Without that power, Sen. Conrad and Sen. Gregg believe that there will not be the discipline to achieve deficit reduction.
Editor's Note: At present, the Budget Commission bill is not likely to be passed. There are three basic obstacles to any meaningful effort to resolve the budget deficit. First, members of Congress have been elected to represent constituents and many believe that protecting spending is their first responsibility. Second, other members of Congress are reluctant to allow a Budget Commission to take effect because they are concerned it will lead to large tax increases on the entire nation. Third, Sen. Baucus and House Ways and Means Committee Chair Charles Rangel (D-NY) oppose the Budget Commission because it would reduce the power of the chairman of the tax-writing committees.
