Trump adviser urges crackdown on tax deductions for nonprofits

One of Donald Trump’s top economic advisers says he would personally like to see rich people get taxed for more of their donations to nonprofits.

Heritage Foundation economics expert Stephen Moore said too many billionaires, like Bill Gates and Warren Buffett, are using charitable organizations to shield themselves from taxes. 

{mosads}But Moore, who met privately with Trump last week to discuss the presumptive GOP presidential nominee’s tax plan, stressed to The Hill that these are his personal views and that the nonprofit crackdown may not be part of Trump’s ultimate tax plan. 

“Look at Bill Gates and Warren Buffett; you’ve got billions of dollars that are never taxed. … One of the big leakages in the tax code is deductions for nonprofits,” Moore told The Hill on Monday.

“More and more economic activities are declared nonprofit. … It’s the way that high-income people shelter their wealth.”

Trump has asked Moore and CNBC commentator Larry Kudlow to advise him on economic policy, which includes his tax, energy and trade plans.

Moore said he and Kudlow met with the billionaire businessman at Trump Tower in Manhattan on Thursday to discuss tax policy and other economic issues. 

The tax discussion followed a separate meeting during which representatives from industries including oil and gas, transportation, pharmaceutical, healthcare and financial services aired their grievances to Trump about the “regulatory assault” from the Obama administration, Moore said.

No final decisions were made during the meetings about the tax plan, but Moore said he expressed frustration that the federal government is losing huge sums in tax revenue because too many businesses are establishing themselves as nonprofits to dodge taxes.

Moore said the policy challenge would be writing law that distinguishes between genuine charities, like churches and the Salvation Army, and those that should be subject to taxes.

“The question is: Could you make a distinction between a church, homeless shelter, soup kitchen versus the Brookings Institution?” he said, referring to the nonpartisan think tank. Moore’s employer, the Heritage Foundation, is a conservative think tank.

If Trump were to put limits on the tax deduction for donations to nonprofits, he would risk contradicting the tax plan he released in September, but Moore said the Trump campaign would likely not touch charitable deductions because they are “probably the most sensitive [tax deductions] of all of them.”

“People feel like it’s really important to have deductions for the Salvation Army or whatever it might be. So I can see there being a good chance that the deductions remain,” he said.

Trump’s current tax plan states, “Charitable giving and mortgage interest deductions will remain unchanged for all taxpayers.”

The Trump campaign did not respond to a request to comment for this article.

Trump spokeswoman Hope Hicks told The New York Times last month that the candidate is not changing his tax plan and that Moore and Kudlow don’t speak for the campaign.

But Trump has separately said his tax plan would be the starting point for negotiations with congressional Democrats and not the final word.

Trump’s plan calls for lowering the top individual tax rate from 39.6 percent to 25 percent and the corporate tax rate from 35 percent to 15 percent.

The plan would collapse the current seven individual income-tax brackets to four: Zero percent, 10 percent, 20 percent and 25 percent.

“With this huge reduction in rates, many of the current exemptions and deductions will become unnecessary or redundant,” the plan states. 

“Those within the 10% bracket will keep all or most of their current deductions. Those within the 20% bracket will keep more than half of their current deductions. Those within the 25% bracket will keep fewer deductions.”

The Trump tax plan has drawn criticism for its projected impact on the federal deficit. 

The free-market Tax Foundation has estimated that the proposal would cost about $10 trillion over a decade after taking into account the economic effects of the plan.

Moore told The Hill that Trump wants his tax plan to help the middle class most of all, so “we are going to try to formulate something that cuts tax rates but … you would pay for that almost dollar-for-dollar by taking away deductions and credits.”

Under Trump’s plan, “really high-income people would lose almost all their deductions,” Moore said.

The changes to Trump’s tax plan Moore and Kudlow have already recommended include raising its top individual tax rate to 28 percent and increasing the rates for the other tax brackets in his proposal. 

They have also recommended capping itemized deductions at $50,000 for married couples and scaling back Trump’s proposed increase to the standard deduction.

Additionally, Kudlow and Moore have recommended that Trump reduce the number of people who would pay no income tax and allow businesses to immediately deduct the full cost of their capital investments, according to Tax Foundation Director of Federal Projects Kyle Pomerleau.

Pomerleau said that the reduction in the size of the standard deduction and the increase in the tax rates compared to Trump’s original plan “would erase a lot of the benefits in the current tax plan that go to the middle class.”

But Tax Foundation economist Alan Cole tweeted last month: The altered plan “wipes out essentially the entire middle class benefit, so I don’t think Trump would actually adopt it.”