GIVING TIME OF YEAR: We’re officially back in full swing this week with both the Senate and House in session, and it’s certainly possible we could see some movement on that GOP tax package spearheaded by House Ways and Means Chair Jason Smith (R-Mo.) — pending a successful resolution of concerns raised by SALT caucus Republicans. And in that package, you may recall, is a proposal led by tax writers Michelle Steel (R-Calif.) and Nicole Malliotakis(R-N.Y.) to boost the standard deduction by around $2,000 for single folks and around $4,000 for couples in 2024 and 2025. Republicans championed the boost as a policy to alleviate some of the pains of inflation and help put money back in taxpayers' pockets. The plan was also understood by observers to (at least partially) operate as a sort of carrot for lawmakers representing districts with high state and local taxes. But here’s another thing you might not have thought of when it comes to a beefier standard deduction: What happens if even fewer taxpayers choose to itemize as a result? Well, among other things, charitable contributions could take a hit. That was a concern back in 2017 when the Tax Cuts and Jobs Act doubled the standard deduction, and the charitable community is now in fact raising the alarm about a significant drop in the number of small- and mid-sized donors who give to charities. Sympathetic lawmakers in Congress therefore want to pass legislation that would allow taxpayers opting for the standard deduction to be able to claim an additional third of that deduction (around $4,500 for individuals) for any charitable donations they make. Of course, with a boatload of extenders floated for a potential year-end package and the cost of such a package adding up, we'll have to see just how charitable (badum-pshhh) lawmakers are feeling around Christmas time. BACK IN A MOMENT: And greetings from your Weekly Tax author returning from a week’s vacation. But guess what? You only need to wait a week more before the true master of the tax newsletter, the esteemed Voltaire of our humble craft, returns from his leave with his new Baby Tax. That’s right: the one and only Bernie Becker. In the meantime, don’t hold back on the good stuff. Email: bfaler@politico.com, bguggenheim@politico.com and teckert@politico.com. Or Twitter: @tobyeckert, @brian_faler, @ben_guggenheim, @POLITICOPro and @Morning_Tax. Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories. WHAT YOU SHOULD KNOW: Bills that would create an expanded “universal charitable deduction” were introduced this year by Reps. Blake Moore (R-Utah), Danny Davis (D-Ill.), Michelle Steel (R-Calif.) and Chris Pappas (D-N.H.) in the House, and by Finance Committee members Chris Coons (D-Del.) and James Lankford (R-Okla.) in the Senate. And now Independent Sector, a nonprofit coalition, is wielding new polling shared exclusively with Weekly Tax that it says shows broad bipartisan support for more robust tax incentives for charitable giving. “When you have more than 80% of Republicans and Democrats and Independents wanting to see Congress enact an expanded charitable deduction for everyone, it’s a real mandate,” said Ben Kershaw, director of public policy and government relations at Independent Sector, of the poll’s findings. According to the polling, 87 percent of voters say they would like to see a permanent restoration of the $300 universal charitable deduction, which was created as a relief measure during the pandemic but expired at the end of 2021. Fifty-one percent of voters says they strongly support the idea, and over half of surveyed voters said they would give more to charities if they could get deductions for their donations. The push for bolstered tax incentives comes on the heels of a rare decline in charitable giving in 2022. Overall donations dove by 10.5 percent, with giving by individuals seeing the steepest decline (13.4 percent) compared to that from foundations and companies, according to a report by Giving USA. Skeptics have long insisted that the charitable deduction is an unnecessary give-away for wealthy folks who would give to charity anyways... but advocates in the charity space are pointing to such data to insist that failing to support the charitable deduction poses serious risks to charities across the country. “The vast majority of Americans did not have access to a charitable deduction [in 2022], and we saw giving drop both in absolute dollars and by more than 10 percent in real dollars,” Kershaw said. “Charities are really concerned about that.” DIRECT FILING SYSTEM: More than 120 professors across the country have signed onto a new letter addressed today to public officials that applauds the IRS for its efforts to pilot a direct free-filing system run by the agency. The letter, which was spearheaded by Dan Jaqua of George Washington University and Erin Scharff of the Sandra Day O'Connor School of Law, underscores how low-income workers spend a significant portion of their refunds on tax prep services. The letter also notes how only 3 percent of eligible taxpayers use free filing services offered by the IRS in partnership with tax prep companies. “The fact that the IRS is moving forward with this pilot project is so exciting and so important,” Scharff told Weekly Tax, adding that it is very apparent to her colleagues who signed onto the letter and work in a wide range of disciplines that the current tax preparation system is not working for everyday people. “It’s real enthusiasm and excitement,” Scharff said of the support for the free-filing system in academia. The American Coalition for Taxpayer Rights, which represents the nation's leading tax prep companies, insists on the other hand that the IRS will run into significant challenges administering the system and ultimately produce a far inferior tax filing tool. “This letter seems to be a tacit admission that IRS Direct File is in real trouble. The IRS always understood the complexities of this undertaking, while the proponents of Direct File did not," the coalition said in a statement to Weekly Tax. "We understand that very few states have signed up to participate, the tool will only be offered to a small subset of taxpayers, and Direct File will be greatly inferior to private-sector tax software," the coalition said. The signatories of the letter include well-known scholars in the tax community such as Daniel Hemel of New York University School of Law and Keith Fogg, who supervised the creation of the Federal Tax Clinic at Harvard Law School. Joseph Stiglitz of Columbia University, the Nobel prize-winning economist and former chief economist of the World Bank, has also signed onto the letter. AND IN CASE YOU MISSED IT, you should really take a read of our Josh Gerstein’s Friday report on how Supreme Court Justice Samuel Alito is rejecting calls from Senate Democrats to recuse himself from a tax case because Alito was interviewed by one of the attorneys involved in the case for the Wall Street Journal. Moore v. United States could have profound implications for the constitutionality of large swaths of the tax code related to the taxation of unrealized income.
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