Republicans just released a 9-page framework they hope will eventually unify the party behind a proposal to reform the U.S. tax code. The document, titled “Unified Framework For Fixing Our Broken Tax Code,” specifically states:
“In order to simplify the tax code, the framework eliminates most itemized deductions, but retains tax incentives for home mortgage interest and charitable contributions. These tax benefits help accomplish important goals that strengthen civil society, as opposed to dependence on government: homeownership and charitable giving.”
The framework also proposes to simplify the tax code by roughly doubling the standard deduction to $12,000 for individuals and $24,000 for married files. These changes are said to effectively create a larger “zero tax bracket” by eliminating taxes on the first $24,000 of income earned by a married couple and $12,000 earned by a single individual.
Critics from the nonprofit sector argue that if the standard deduction becomes larger, fewer taxpayers will need to itemize, reducing the incentive to hold a mortgage or contribute to charity.
These critics – such as the Alliance for Charitable Reform – are not necessarily arguing against the increase of the standard deduction, but they are warning lawmakers about the ripple effects of such an increase throughout the economy. They are afraid, in other words, that charitable giving would plummet if the standard deduction would be doubled without creating an additional incentive.
To strike a balance, they have urged lawmakers to consider creating a "universal deduction," so that taxpayers that take the standard deduction can get an additional credit for donations.
We'll see whether lawmakers listen.