Frank Bernheisel: The View From Here
Frank Bernheisel
Frank Bernheisel
Posted 01.31.12
Just Outside Washington


Free tax ride for charitable institutions?

I was listening to C-SPAN radio while shaving the other morning and the discussion was about Mitt Romney's tax return, the President's speech, and the deficit. A man named Charles called in and pointed out that Mitt had deducted $7 million for charitable contributions for 2010 and 2011.

Of this, $3.1 million went to the Mormon Church. Charles made the statement that allowing this tax deduction for Romney made him (Charles) pay more taxes and effectively forced him to support the Mormon Church.

He further asserted that removing the charitable institution deduction at the federal, state and local level would go a long way toward making all three levels of government solvent.

So, using Romney as an example, he reduced his taxable income by $7 by giving money to the Mormon Church and other charities. If charitable deductions were not allowed like the caller suggested, then Romney would pay an additional $1.05 million in taxes at the 15 percent capital gains rate.

And if the special capital gains rate were abolished, as recommended by the Simpson Bowles Commission, Romney would pay an additional $2.1 million in taxes.

In 2010 Americans gave $290 billion to charitable organizations according to the American Association of Fund Raising Counsel. If the deductions were eliminated and this money was taxed at the 30 percent rate, it would provide almost $60 billion in tax revenue annually.

Another example

We live in Falls Church, Virgina, not the city but the area that had the name before the current city was incorporated in 1948. The data on the city is available; it has an area of 2.2 square miles and 4.2 percent of the area is used by Private Institutions, a zoning and land use designation that includes churches, cemeteries, charitable organizations, etc. Needless to say Falls Church City is having a tough time balancing its budget during the Great Recession.

It has laid off employees and is squeezing the school system. The 4.2 percent of land comes out to approximately 1.17 million square feet. The real estate taxes on Kathy's mother's house in the City, compute to $0.57 per square foot for the land, not counting the improvements.

Applying that rate to the Private Institutions land-use category would result in additional $668,000 annual tax revenue for the land. I would guess that the amount should double if the improvements were included. The $1.3 million would make a significant contribution to the total annual City budget of $65 million.

One church property, not the school, parking lot, minister's house, or other ancillaries, is assessed at $9.056 million and if they paid property taxes at the rate of Kathy's mother's property, the income to the City would be $118, 000 per year.

So, I agree with Charles who called in to C-SPAN, lets remove these provisions from the federal, state, and local tax codes. I would be personally impacted as well as Romney and I would have to pay higher taxes because I make substantial contributions to non-profit charitable and educational organizations. I would need to decide if they were worth spending after tax dollars on.