JEC Report: Charitable Deduction Needs Reform
Charitable giving would increase if tax policy changes were made
Downward trends in charitable giving could be reversed if tax policy were changed to make the charitable deduction more widely available, according to a Nov. 3 report sponsored by Republican members of the Joint Economic Committee (JEC).
While total annual giving to charities has risen in most years for the last half century, to $428 billion in 2018, the percentage of Americans giving has decreased, from 66 percent in 2000 to 56 percent in 2014. The drop in giving is particularly pronounced among non-itemizers, those giving to religious causes and lower-income Americans.
“Reversing these trends and rebuilding civil society will require capitalizing on the strengths of America’s associational life to address its weaknesses,” the report says. “One way of doing so is to reform policy so that less of the charitable giving of Americans is subject to taxation. Doing so would be more consistent with the principle that people should not be taxed on money they give away.”
Changing tax policy to make the charitable deduction available to both itemizers and non-itemizers would reduce federal revenue but incentivize charitable giving, the JEC report said. Moving the charitable deduction “above the line” in this way would give charitable giving the same tax treatment as retirement account contributions and student loan interest payments. A 2018 study by the American Enterprise Institute estimated that replacing the current charitable deduction with an above-the-line deduction would have increased giving by $21.5 billion in 2018.
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