Whenever Congress tries to "reform" or simplify the federal income tax code, the result almost always is a series of tradeoffs.
Often, the lawmakers' efforts to eliminate inequities in the law end up complicating the tax system at the same time. In other instances, simplifying the tax code may mean eliminating some worthwhile tax incentives.
These tradeoffs have been high-lighted by the recent push in Congress to streamline the tax system by making it more attractive for taxpayers to use the standard deduction, instead of itemizing their claims.
Not only has the standard deduction been increased significantly, but last year it was combined in tables with the $750-a-dependent personal exemption. Now taxpayers can figure both in a single step - a simpler exercise than before.
It's easy enough to see why the lawmakers have become so attracted to the standard deduction ploy. The fewer Americans who itemize, the simpler the tax system seems to voters. And the change benefits lower-income persons.
As a result of the recent changes, the proportion of taxpayers who itemize has shunk from more than 30 percent in the early 1970s to 25 percent now. And President Carter's new tax package would reduce this to 17 percent.
The difficulty is that while shifting to the standard deduction may make filing returns simpler for many Americans, it sometimes has some adverse side-effects - particularly in cases where itemizing is an incentive.
A case in point may be the deduction for charitable contributions. When proportionally more taxpayers itemized their deductions, the writeoff was available to more persons - and presumably influenced some to donate more.
But now, with more taxpayers becoming non-itemizers, the potential impact of the tax incentive has been diminished. And the charities are complaining that their take has been hurt.
Two members of rthe House Ways and Means Committee have introduced legislation designed to correct this situation, by allowing those who claim the standard deduction to claim a separate write off for charitable contributions.
The measure has been introduced by Reps. Barber B. Canable (D-Va.).
In theory, the legislation seems worthy enough. Everyone is for giving to charities. As Fisher has argued to critics, if Congress is going to cut taxes anyway, it might as well give part of the break to aid charities.
But while the measure would offset the impact of the higher standard deduction, tax experts say it also would present some new problems, Indeed, some of them are so profound that even Conable concedes he has even Conable concedes he has some doubts. perhaps the strongest objection to the bill is that it would drain the U.S. Treasury of a massive $3.2 billion in tax revenues - a major expense by any standard, that would bloat the already large federal budget deficit.
(For comparison, the Ways and Means Committee version of the controversial tuition tax-credit bill would cost slightly more than $1 billion - and Carter has suggested he may veto it as too inflationary.)
But there also are other important considerations. The shift to the larger standard deduction was designed to simplify preparation of tax returns by making it unnecessary for taxpayers to itemize their deductions.
Critics argue if Congress chips away at that, it will open the door to exceptions as well. In no time, the short form could become a long form again - and the simplification effort would be undone.
Finally, there's the debate over whether the recent changes actually have hurt charities as much as they claim. The argument involves how much incentive the deduction provides. Tax experts appear to be split on the issue.
The traditional thinking has been that donations by lower - and middle-income taxpayers - those most likely to be taking the standard deduction - aren't heavily dependent on whether they can claim a writeoff for the gift.
The rational is that these tax payers usualy give the bulk of their contributions to churches and door-to-door solicitations - do-nations they probably would make anyway even if there were no deduction.
Analysts say the main impact of the deduction has been to spur giving by higher-income taxpayers - those involving major gifts to universities and private foundations. And most of these taxpayers still itemize anyway.
But Martin Feldstein, the Harvard economist, recently has come up with a series of studies that contend that the deduction is indeed a strong incentive to giving in almost all income-brackets, to small charities as well as large.
It's on this basis that the charities argue that the recent expansion of the standard deduction has been costly for them. Conable cites industry figures claiming the shift has reduced contributions by $1.4 billions.
The issue is whether the recent simplification of tax return preparation has really done enough harm to charities to justify $3.2 billion in new tax breaks and invite further complication of the code in coming years.
As in any such set of tradeoffs, the debate is certain to spark controversy. But at a time when the budget deficit is $60 billion and still climbing, there are those who would ask whether this is a contribution the nation can afford.