WASHINGTON, DC – At a Senate Finance Committee Hearing on tax provisions in the President’s budget proposal, Senator Roberts questioned Treasury Secretary Timothy Geithner on the wisdom of penalizing small businesses, homeowners and those who make charitable contributions with tax increases at a time when the nation should be improving employment, the housing market and supporting those that help others in a troubled economy.

"Mr. Secretary, at a time when the federal government is taking unprecedented steps to shore up the housing market, and make homeownership possible for qualified homeowners, it seems counterintuitive to reduce an inherent incentive in the tax code to own a home," Roberts said.

"What does limiting this tax incentive mean for individuals who have purchased a home within their means, and who intend to live in it for a number of years, or for individuals who are looking to purchase a home right now? Shouldn’t we give them some certainty in the tax code with regard to the mortgage interest deduction?

"What does it mean for the value of their home – isn’t there a concern that limiting the deduction would further depress home prices?

"How do you explain that on one hand, the government is providing billions of dollars to aid housing – including a $75 billion plan that you, Mr. Geithner announced a few weeks ago – to aid those who have bought homes they can no longer afford, and aid homeowners who are underwater in their mortgages, but on the other hand, we are going to reduce a tax incentive for those who make over a certain amount who own a home and are making a mortgage payment or are looking to buy a home?

"Furthermore, in this current economic climate, many charitable organizations across the country are being asked to do more with less as donors tighten their belts while more people turn to charities for assistance.

"One analysis found that if the proposed tax changes in the budget were in effect in 2006, total itemized contributions by the highest income households would have dropped by 4.8 percent or $3.87 billion. The total value of charitable contributions that high-income households reported on their tax returns in 2006 was $81.26 billion – more than 40 percent of all itemized charitable deductions. The study estimated that if the budget proposal had been in place in 2006, total itemized charitable giving by households would have dropped by 2.1 percent.

"Yet, this budget not only raises income taxes on those in the top two income tax brackets, reducing their discretionary income – from which they make charitable contributions – it also reduces the value of the deduction for charitable contributions for taxpayers in these brackets.

"Clearly, these changes will not bring a halt to charitable giving – but will it not reduce the contributions to charities at a time when Americans are relying more on charitable assistance and won’t the cost of a decline in charitable giving will be borne by those most in need of assistance? Why would the administration create any disincentive that will reduce donations to charity?"

"I am very concerned about what the tax provisions in the President’s budget proposal will mean for small businesses. In Kansas, we have over 60,000 small businesses, which make up 97 percent of the state’s employers. They are the leading job creators in the state and this budget will raise their taxes. The budget proposes to reinstate the 36 percent and 39.6 percent income tax rates for individuals earning over $200,000 and for families earning over $250,000 and reduce the tax rate for itemized deductions for these taxpayers, which will effectively raise small businesses income taxes rate even higher.

"Now, I know that some will say that this budget doesn’t raise taxes on that many small business owners. However, NFIB data shows that 50 percent of the small businesses owners that employ 20-249 workers would fall into the top two brackets. And, over half of the nation’s private sector workers are employed by small businesses with 20-500 employees.

"It would seem to me that this is not a group that should see their taxes increased. At a time when we want to create and preserve jobs in this country, we should not be raising taxes on employers who are creating jobs. Many small businesses in Kansas are worried about how they will pay more taxes, when they already feel as though they are stretched to the limit. They are concerned that in order to pay this additional tax burden, they may have to lay off workers, reduce wages or benefits, limit or stop hiring new employees, or pass these costs onto their customers."

Senator Roberts is a member of the Senate Finance Committee.

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