5/1/15 CGC Defends Charitable Deduction in Response to Washington Post
In a letter sent to the Washington Post on April 28, the Charitable Giving Coalition defended the charitable deduction from the editorial board’s assertion that the deduction serves only the wealthy. Read the entire letter below.
While discussing Hillary Clinton’s economic message, The Washington Post’s editorial board suggested on April 22 that the charitable deduction is simply a tax expenditure that only benefits the rich. We firmly disagree with that assertion and encourage The Post’s editorial board to consider the drastic effects that “limit[ing] or abolish[ing]” the charitable deduction would have on those Americans who are less fortunate.
From healing and educating to enriching lives through the arts to feeding the hungry and providing relief in times of crisis, the charitable sector, built upon philanthropic contributions leveraged by the charitable deduction, is inextricably linked to our communities. The charitable deduction is unique as it is the only tax provision that encourages an individual to give away a portion of income for the benefit of others.
As Ranking Member Ron Wyden (D-OR) of the Senate Finance Committee wrote on January 23, 2014, the charitable deduction is “a lifeline, not a loophole” and has been for almost 100 years. No other tax policy can match the benefit it delivers for the country. It is overwhelmingly supported by the majority of Americans, provides help for those most in need , buoys the economy and relieves thinly-stretched government service programs, all the while providing no direct benefit to the donor beyond the deduction. Sen. Benjamin Cardin (D-MD)’s tax reform proposal (that The Post’s editorial board applauded on Feb. 23, 2015) recognizes the uniqueness of this vital provision by preserving the full scope and value of the charitable deduction.
In 2013 Americans gave away $335 billion to charitable causes, according to the annual Giving USA report. While donors do not choose to give to charity because of the tax deduction, it very much affects the amount they are able to give and how often they give. Why else has Congress extended the deadline for claiming a charitable deduction for certain charitable needs, such as recovery from Typhoon Haiyan or the murder of New York City police officers? The charitable deduction works, and lawmakers know it.
What’s more, the money donated to America’s nonprofits is leveraged beyond simply providing charitable services. The nonprofit sector employs 10 percent of the U.S. workforce, generates more than $1 trillion every year in jobs and services, and accounts for more than five percent of the gross domestic product. Approximately 62.6 million Americans, or 25.4 percent of the adult population, gave 7.7 billion hours of volunteer service worth $173 billion in 2013.
Limiting the deduction, as The Post suggests, would be devastating to nonprofit organizations. For example, if the charitable deduction were capped at 28 percent—as has been proposed by the President in every budget he has submitted to Congress—the nonprofit sector could lose as much as $9 billion in the first year alone according to the American Enterprise Institute.
Similarly, the two percent of adjusted gross income (AGI) floor included in former House Ways and Means Committee Chairman Camp’s Tax Reform Act of 2014 could result in a loss of up to $10.5 billion in charitable contributions based upon Urban-Brookings Tax Policy Center estimates. These potential reductions in giving would debilitate the nonprofit sector and undermine our recovering economy—not to mention the harm it would do to those who rely significantly on charitable services.
Although The Washington Post’s editorial board is correct in saying that the policy goals behind the charitable deduction “are being achieved,” it is not at an “unduly high cost in inequality.” The charitable deduction encourages people to give away money that is then utilized by nonprofits for the benefit of others—it fuels an intrinsic redistribution of funds and/or property. If anything, tax provisions like the charitable deduction that invigorate philanthropic giving form the foundation for rectifying inequality.
About The Charitable Giving Coalition
Formed in 2009, the Charitable Giving Coalition’s members include more than 60 diverse organizations representing private and community foundations, their grantees and independent charities, as well as nonprofit organizations and the associations and umbrella groups that serve their needs. The coalition is dedicated to preserving the charitable tax deduction, which is crucial to ensuring our nation’s charities receive the funds necessary to fulfill their essential philanthropic missions. The coalition provides a unique and unified voice on Capitol Hill, including lobbying and grassroots advocacy, on issues affecting the charitable deduction.