GENERAL PRINCIPLES OF RESPONSIBLE UNITED STATES TAX POLICY
66th General Assembly December 2001 Boston, Massachusetts
GENERAL PRINCIPLES OF RESPONSIBLE UNITED STATES TAX POLICY
From the Torah's command that we shall "open our hands to the poor and needy among us" (Deuteronomy 15:7), Judaism has developed a rich tradition of communal social services. Everyone who had established residency in a community was responsible to pay into two funds to support the poor: the kuppah, and the tamchui. These funds were used to provide money and food, respectively, for the poor in the community. Other funds were established to provide clothing and burial needs, and education and health care were provided free to all those who could not afford to pay. Our commitment to such services is based on these values and precedents. In our society, the only institution that has similar power to require all to contribute, through the levying of taxes, is the government. From a Jewish perspective, paying taxes is regarded as a religious obligation.
Following a period of economic growth and prosperity, at the start of 2001, the United States was faced, for the first time in decades, with a projected budget surplus. Twenty years ago, in 1981, the United States implemented massive tax cuts for the well-off, leading to cuts in education, job training, food subsidies, preventive medical care, and housing assistance to the elderly, the poor, and the disabled. Only after tax increases in 1994 did annual deficits begin to decline and turn into surpluses. Since then our government has had the undeniable ability to address the needs of the most vulnerable in our society, including the 10.8 million children in America without health care coverage and the approximately 750,000 men, women, and children who sleep on the streets and in the shelters of America every night. However, now once again we are heading down the same road that led to the mounting deficits of the 1980s and placed domestic programming in jeopardy.
Instead of investing in initiatives that will promote the health and well-being of all Americans and will help us realize the biblical vision that "there shall be no needy among you" (Deuteronomy 15:4), Congress has enacted massive tax cuts that will mainly benefit the most affluent in our society. Despite several provisions to help low-income individuals and families, such as a significant expansion of the "refundable" component of the child tax credit and an expansion of the earned income tax credit for married families, the tax cuts as a whole remain heavily tilted toward those at the top of the income spectrum.
In April, while the tax cuts were being debated, the Congressional Budget Office (CBO) released revised, ten-year budget projections that show a budget surplus of approximately $5.6 trillion over the ten-year period from 2002 through 2011. However, because Congress has voted repeatedly to wall off the surpluses in the Social Security and Medicare Hospital Insurance trust funds, the surplus available for tax cuts and discretionary spending was much less-$2.7 trillion over the decade, according to the CBO figures. These CBO projections did not account for the newly enacted tax cuts. Also unaccounted for were the increased interest payments on the national debt, which will reduce the projected surplus further-to approximately $1.1 trillion after the tax cuts.
In order to "fit" the enacted tax cuts within what the administration termed the "available surplus," Congress phased in the tax cuts over the ten-year period and then provided "sunsets," which will terminate some of them at various times during that period. At the time, no one could predict whether the tax cuts would be allowed to terminate or simply be extended as they are scheduled to expire. Since the tax cuts were enacted, the prognosis for the economy has grown worse, and since the horrors of September 11, there have been drastic plunges in some sectors of the economy, with a likely recession beginning and increases in spending for defense and disaster relief. While a real stimulus may be needed, efforts to accelerate the enacted tax cuts and enact new corporate tax cuts will not stimulate the economy and will only exacerbate the deficits in the near term when stimulus is needed. It now appears certain that a return to an era of deficits is upon us, and cuts in domestic programs aimed at helping the most vulnerable among us are inevitable.
Because the tax bill is so costly, we believe that Congress must reconsider many of the provisions that are not yet in effect effective and adopt tax policies that will give greater weight to the needs of those who benefit least from the recently enacted legislation. We urge such reconsideration in accordance with the policies outlined below to preserve a balance between the obligations placed on taxpayers and the ability of the government to maintain a safety net for those in need and to provide the assistance required not only for their survival but for reaching self-sufficiency.
In the attempt to keep the cost of the enacted tax cut from exceeding Congress's target total of $1.35 trillion, the repeal of the estate tax as enacted will be fully effective for only a single year. The "logic" that was carefully constructed to "balance" the cost of the tax cuts against projected situations has been obliterated by reality. However, if total repeal takes effect for that year, it still seems unlikely that Congress would allow the estate tax to be reinstated. This tax, which is paid by only the wealthiest taxpayers-approximately 2 percent of individual taxpayers-generates significant revenue for the federal government. In Fiscal Year (FY) 1998, roughly 110,000 returns were filed, and the government collected $24.6 billion. In 1999, the government collected $28.4 billion from the estate tax. While we would support modifications of the estate tax to ensure that forced sales are not required by small businesses and family farms, fully eliminating the estate tax will lead only to a greater concentration of wealth and a likely substantial decrease in charitable contributions. The Treasury Department estimates that between $5 billion and $6 billion in charitable gifts would be lost if the estate tax is fully repealed.
We would also support the use of tax incentives to increase contributions to charities. These include proposals allowing non-itemisers-approximately two-thirds of all taxpayers-to deduct up to 100 percent of their charitable contributions. We believe this will encourage individuals to increase their giving, helping nonprofits do the vital work that benefits communities and people across America. We would also support proposed plans to allow charitable rollovers of Individual Retirement Accounts (IRAs) without penalty. Under current law, when making a contribution to a charity from an IRA, an IRA owner must include the withdrawal as income and claim an offsetting charitable deduction. For large contributions to charity from IRAs, this creates the possibility that individuals will not be able to deduct the full value of the contribution because of the limits on the percentage of one's income that may be deducted for charitable contributions. Thus the IRA charitable-rollover proposal provides that charitable contributions may be made directly to a charity without penalty, thereby simplifying and stimulating increased giving from IRAs to charity.
We support tax policy, both now and in the future, that reflects our deep Jewish commitment to the achievement of a just society in which all people can live with dignity and respect.
THEREFORE, the Union of American Hebrew Congregations resolves to:
Oppose any tax policies, including rate cuts, that restrict the government's ability to address urgent needs both in the United States and abroad;
Oppose any tax policies, including rate cuts, that unfairly and inequitably bestow their benefits on the wealthy in our society;
Call on Congress and the administration to reexamine the tax cuts of 2001 in light of emergent fiscal and national security realities;
Support deficit reduction and efforts toward a balanced budget generally, as long as such efforts do not undermine addressing needs within our communities or compromise the security or economic well-being of our nation;
Oppose the repeal of the estate tax, recognizing that if there are problems with the estate tax, the solution is to make appropriate modification to the law, not repeal it; and
Support tax policies that increase incentives for charitable giving, including:
Charitable-giving tax deductions for non-itemisers; and
IRA rollovers and deductions for charitable purposes without penalty.