The three visitors to the office of Rep. Charles Rangel leaned forward intently. One by one, they made their cases for keeping tax incentives for charitable contributions to the New York Democrat's legislative assistant, William Signer.
"We feel this is extremely unfair in terms of what we do to help the public good," said John J. Murray of the Cornell Medical Center in New York.
"You also have to think about who would pay the cost of these services if donations were cut back," said Faith Lasser of Irvington House Institute, which runs medical research laboratories.
"We have to do everything we can to encourage low-income people to contribute," said Paul V. DeVitt of the YMCA of Greater New York.
The three New Yorkers were just a few of the representatives of charitable organizations who made the rounds on Capitol Hill yesterday, talking mostly to congressional staffers and telling them of the dangers inherent in the Treasury Department's proposal to simplify the tax code. Operating under the auspices of an organization called Independent Sector, they came from all around the country to plead their case.
The Treasury proposals -- which include allowing no deductions until charitable giving exceeds 2 percent of income, doing away with the provision permitting non-itemizers to deduct contributions and restricting deductions for gifts of property that have gone up in value -- will reduce donations by 20 percent and thus curtail a host of worthwhile activities, according to charity lobbyists.
A sizable body of economic research, however, indicates that the picture may be, if not different, at least more complex than the one described by charitable oragnizations yesterday.
The deduction for contributions, for example, benefits the rich more than it does lower-income taxpayers. High marginal tax rates that now encourage deductible donations are not something for which the charities want to lobby. And an increase in disposable income, which most taxpayers would get from the Treasury Department's tax plan, could partly offset charities' losses if people have more money to donate.
"My view is, the Independent Sector is not leveling with the Congress on lots of things," said a prominent economist who asked that his name not be used because he works for a nonprofit institution that receives deductible contributions. "They are exaggerating the effects of the 2 percent ceiling, and they overlook the fact that half of the effect of the Treasury plan is a result of the fact that tax rates are being cut."
In general, people spend more money, on goods or on contributions, when the price is low. And the "price" of charitable giving is lower when the after-tax cost is less because of the impact of the charitable contribution deduction at higher tax rates. That "discount" would be reduced by lower tax rates.
Charitable organizations admit, with some embarassment, that the lower tax rates included in all the major simplification plans would curtail donations. But they are reluctant to oppose such a popular change.
"We have a dilemma," said Steve Delfin of United Way of America. "Any lowering of the tax rate is going to result in the net cost of the gift being more. We don't want to be against lower rates, so we're looking for alternatives to replace the money we would lose" because of the diminished tax incentive for giving.
A recent study by Gabriel Rudney of Yale University and Gerald Auten of Bowling Green State University found that contributions by well-to-do taxpayers are more likely to be affected by the tax code than giving by lower-income taxpayers.
More than 90 percent of charitable contributions made by families with incomes between $10,000 and $20,000 per year is not tax-induced, the study's authors found.
For that segment and for other lower-income groups, the deduction (permitted in part for taxpayers who don't itemize) "is a wasted subsidy," Rudney said. "This is giving that would take place without the deduction."
Tax experts also mention other factors that are hard to quantify but that might muddle the anticipated effect of restrictions on the charitable deduction.