11 Pages Posted: 3 Mar 2017
Date Written: January 30, 2017
Leading tax reform proposals contemplate a charitable deduction claimed by just five percent of taxpayers. Such a limited deduction would fatally undermine the foundations of a giving incentive that has fostered an altruistic and pluralistic society through its broad-based participation and would seriously harm the charitable sector. Section 501(c)(3) would recede in importance as setting the standard for a public benefit organization. More gifts would go to private benefit and political organizations. The article argues that a charitable deduction for the few should be rejected. Instead, Congress should consider expanding the charitable giving incentive by extending it to more taxpayers in the form of a credit. A credit would remove long-standing inequities, allow for smarter charitable giving policy in the future, and improve transparency. If a charitable deduction for the few does become part of tax reform, however, changes should be made to ensure that deductible contributions are not abused but go to active public charities.
Keywords: charitable deduction, 501(c)(3), pluralism, itemized deductions, tax credit, tax reform, tax policy, giving incentives, above the line deduction
JEL Classification: H2, H20, H24, H5, H6, I3, K34, L3, L38, N30
Suggested Citation: Suggested Citation
Colinvaux, Roger, The Importance of a Participatory Charitable Giving Incentive (January 30, 2017). Tax Notes, Vol. 154, No. 5, 2017. Available at SSRN: https://ssrn.com/abstract=2924562