My husband and I tithe to our church, meaning we give 10 percent of our income. We also donate money to various charities.
Our giving results in a tax break because we itemize on our tax return.
Would we give less if we didn’t have the tax deduction? I’m confident we wouldn’t. We give because we believe it’s the right thing to do for folks who are fortunate enough to have money to give. Having the tax deduction is a bonus but one that has never driven us to give more or less. I’m actually a bit turned off when a charity tries to persuade us to give by overly emphasizing with the standard phrase, “Your donation is tax deductible.”
But having said this, many people are motivated by tax breaks. And some do give more because of the charitable deduction.
Our country is deep in debt, and our leaders are struggling to find ways to get the federal budget in balance. We are facing a “fiscal cliff” – the expiration of the Bush tax cuts along with spending cuts – that could trigger another recession. One strategy that has been proposed to avoid the cliff is to reduce or eliminate the deduction for charitable donations.
In his 2013 budget, President Obama proposed capping the deduction for taxpayers earning more than $250,000 at 28 percent – even if they are in the 33 percent or 35 percent tax bracket. The president argues that most taxpayers don’t get the benefit of the deduction because they don’t itemize. And the tax break tends to benefit the wealthiest citizens the most.
The charitable deduction is a lucrative target because “among the many tax expenditures that are in the federal tax code, the tax deduction for charitable contributions is among the largest in terms of its estimated revenue impact,” according to a research paper by Joseph J. Cordes, an economics professor at George Washington University.If the government caps the deduction, charitable organizations fear that Americans will cut back on their giving.
Regardless of household income, education, age, race or gender, people overwhelmingly support the deduction, according to a survey by Dunham+Company, a consulting firm for charitable organizations. The company also found that 33 percent of donors said they would reduce their giving if the charitable deduction didn’t exist. The figure climbed among key giving groups, with 40 percent of donors ages 40 to 59 saying they would reduce their giving.
I find that statistic shameful. You should give with no expectation of a reward if it’s truly a selfless act.
Still, we can’t take the chance that much-needed funds going to worthwhile nonprofit organizations serving our communities would be reduced if the deduction is capped. Charitable donations help take up the slack from reduced government services and financial aid to people in need. That’s an economic benefit we can’t afford to mess with.