8 Pages Posted: 29 Nov 2013
There are two principal rationales for the charitable deduction. Depending upon choice of rationale, some tax reform changes are suggested and others are not. A base measurement rationale suggests eliminating the deduction for unrealized appreciation, keeping the benefit as a deduction and not a credit, not adopting caps or a nonitemizer deduction, and protecting the tax base by narrowing the class of organizations eligible to receive deductible contributions. A subsidy rationale, depending upon which strand is emphasized, might favor a more equitable tax benefit in the form of a credit or through caps or a nonitemizer deduction, and could lead to preferring some organizations over others. Both rationales are consistent with placing a floor under the deduction, and narrowing its scope. Present law presents a confusing mix of policies and priorities. Tax reform presents an opportunity to reconsider the role of the charitable deduction in the tax system and to act accordingly.
Keywords: charitable deduction, tax reform, subsidy theory
JEL Classification: H2, H20, H24, H4, H5, I00, I10, I20, I30, L3
Suggested Citation: Suggested Citation
Colinvaux, Roger, Rationale and Changing the Charitable Deduction. Tax Notes, Vol. 138, No. 1453, 2013; CUA Columbus School of Law Legal Studies Research Paper No. 2013-9. Available at SSRN: https://ssrn.com/abstract=2244915