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GENERAL
PRINCIPLES OF
RESPONSIBLE UNITED STATES TAX POLICY
Submitted
by: The Commission on Social Action of Reform Judaism
BACKGROUND
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 that 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 cut as
a whole remains heavily tilted toward those at the top
of the income spectrum.
In
April, while the tax cut was 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 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. No one can predict whether the tax cuts will
be allowed to terminate or simply be extended as they
are scheduled to expire. If they are extended, all projected
surpluses will have been consumed. A return to an era
of deficits is likely, and cuts in domestic programs aimed
at helping the most vulnerable among us are inevitable.
Because
the tax bill is so costly and contains many provisions
that will not be fully implemented for many years, we
believe that there is time for Congress to reconsider
many of them before they become effective and to adopt
tax policies that will give greater weight to the needs
of those who benefit least from the recently enacted legislation.
We will urge such reconsideration in accordance with 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 needed not only for 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. However, if total repeal takes
effect for that year, it is unlikely that Congress will
allow it to become reinstated. This tax, which is paid
by only the wealthiest taxpayers - approximately 2% 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 100% 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 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 in dignity and respect.
THEREFORE,
the Union of American Hebrew Congregations resolves to:
- Oppose
any tax policies, including rate cuts, which restrict
the government's ability to address urgent needs both
in the United States and abroad;
- Oppose
any tax policies, including rate cuts, which 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 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 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.
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