A week after the White House proposal by Treasury Secretary Timothy Geithner for approximately $1.6 trillion in tax increases, the Republican Congressional leadership submitted their own plan. The Republican plan involves $800 billion in new revenue and approximately $1.4 trillion in savings by curbing the growth in federal spending.

The White House rejected the Republican plan. White House Communications Director Dan Pfeiffer stated, "Their plan includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close, or which Medicare savings they would achieve."

Speaker John Boehner (R-OH) compared his proposal to a potential compromise plan discussed by Erskine Bowles, Co-Chair of the National Commission on Fiscal Responsibility and Reform. Boehner suggested that his plan produces new revenue "through pro-growth tax reform that closes special-interest loopholes and deductions while lowering rates." The plan also creates $900 billion in mandatory spending reductions and $300 billion in discretionary spending savings.

Erskine Bowles published a press release and emphasized that the Boehner plan was not the same as the "Simpson-Bowles" plan. He stated, "I simply took the mid-point of the public offers put forward during the negotiations to demonstrate where I thought a deal could be reached at that time."

Editor's Note: There has been no significant progress this week. Speaker Boehner used the term "stalemate" to describe the situation. It is now becoming extremely difficult for the House and Senate to pass a tax bill prior to the end of the year. President Obama and Democratic leaders suggest that it will be necessary for the Republican House to pass the middle-class tax bill previously enacted by the Senate. This bill avoids tax increases for everyone except upper-income taxpayers. If this course of action is followed, substantial questions remain regarding both adjustment of the Alternative Minimum Tax exemption and the tax extenders.

Nonprofits Defend Charitable Deductions

On December 4^th and 5^th, nonprofits gathered in Washington for "Protect Giving-D.C. Days."

National Council of Nonprofits President Tim Delaney emphasized that a cap on itemized deductions could be very harmful for charitable giving. He noted that on average, itemized deductions for mortgage interest, state and local taxes, medical deductions and other items for upper-income persons totaled $22,233. If there were a cap on itemized deductions of $20,000 or $25,000, there could be limited or no additional deductible charitable gifts. This could have a substantial impact on major gifts and capital campaigns.

Delaney stated, "Additional cuts to domestic programs or disincentivizing charitable giving by placing a cap on all deductions would push many nonprofits over the fiscal cliff."

Vice President of Public Policy David L. Thompson shared similar concerns. He noted that Congress needs "to recognize the ripple effect of any further cuts to domestic programs and ensure they make cuts that do not cost taxpayers more in the long run. And they must immediately take off the table any notion of limiting the effect of tax incentives for charitable giving."

Editor's Note: The current charitable giving limits that allow gifts up to 50% of adjusted gross income apply for December of 2012. Many donors are making substantial gifts this year to take advantage of these generous deduction rules.