This Is a Yogi Berra Moment for the charitable deduction: “It’s déjà vu all over again.”
During the past four years, there have been several proposals from President Obama to cap the charitable deduction at 28 percent as a way to raise federal revenue. Last fall, presidential candidate Mitt Romney suggested creating a “basket of deductions” into which taxpayers could choose to put some mix of the traditional deductions up to a limit. But, these ideas never really gained serious traction. Until now.
On Valentine’s Day, the U.S. House Ways & Means Committee held a special hearing about the charitable deduction as the work on tax reform begins. It was a privilege for me to testify before the committee along with academics and other nonprofit leaders from across the country. The chorus of voices made it clear that limiting the charitable deduction will reduce charitable giving. As a result, nonprofits likely would face a gap of several billion dollars per year. And, while additional tax revenue would be raised by the federal government, the revenue would not be deployed to fill that gap in the lives of the people affected.
The charitable deduction is a multiplier of generosity.
While Congress was working on the fiscal cliff bill back in December, the well-regarded Yale economist Robert Shiller wrote, “Whatever else we do about the tax code, we need to save the charitable deduction, which has done so much good in our country and springs directly from some of our deepest values.”
Most people give from their hearts, not because of a deduction. Still, the deduction definitely affects the size and the timing of charitable gifts. The charitable deduction is not a “loophole;” it’s a multiplier of generosity. It is unique in our tax code—an encourage-ment to act selflessly by spending money on the public good instead of ourselves. We need the full force of that encouragement in this country, now more than ever.
President and CEO