THERE'S an unfortunate irony in the federal income tax plan proposed by the US Treasury Department. At a time when the federal government has cut back its support of social services, privately financed agencies estimate they would face a substantial reduction in contributions if the drastically different tax plan became law. Yet these same agencies recently have taken up the slack by increasing their efforts to aid needy Americans and find they must continue today at least at the same level.
Charitable organizations say that the Treasury Department's plan would substantially decrease the tax incentives Americans now have to make charitable contributions. If enacted, nonprofit agencies say, the plan could be expected to produce a considerable decline in the amount of money received not only by those charities that aid America's needy, but also by museums, orchestras, and other not-for-profit groups.
One major group, the United Way of America, estimates that the tax proposal would result in a 20 percent drop in its contributions; it would, says the organization, be the first decline in charitable giving since the depression of the 1930s.
The tax changes are misguided. No doubt changes ought to be made in the tax code. But they must be thought through more carefully than the changes in charitable giving. What could be more American than encouraging individuals to help those in need and to provide financial aid to worthy cultural organizations rather than to sit back and wait for government to do the job?
All this illustrates the difficulty of trying to graft a significantly different program - in this case, tax reform - onto long-established practices. The long-range assumptions and plans of nonprofit organizations, corporations, and individuals can be knocked askew. Such basic changes as this tax plan proposes must be carefully thought through to minimize the prospect of just such major disruptions as could occur in charitable giving.
One unfortunate element of the proposal would forbid taxpayers to deduct charitable contributions until they exceed 2 percent of gross income, thus removing the incentive for small givers, who now contribute two-thirds of what some charities receive.
Another flawed change would prevent taxpayers from deducting charitable contributions unless they itemize returns, and two-thirds of Americans do not now itemize.