Should the Charitable Tax Deduction Be Axed?

In today’s Wall Street Journal, a proponent for and a proponent against axing the charitable tax deduction explain their positions.  For axing the charitable deduction is Daniel J. Mitchell.  Some of his key points are

* Charitable tax deduction doesn’t boost charitable donations

* Despite changes in rules over the years, the charitable donations hover generally around 2%

* The tax deductions allows charitable organizations to devote too much of their budgets to administrative costs and marketing efforts.

* The tax deduction is given to people who need it the least.  “Upper-income households are the biggest beneficiaries of the deduction, with those making more than $100,000 per year taking 81% of the deduction even though they account for just 13.5% of all U.S. tax returns.”

* Ditching the deduction is a better option for raising revenue versus other proposals.

Diana Aviv argues this tax deduction should be retained.

* Surveys have shown that if the deduction is reduced or eliminated, donations would drop, even among the wealthy.

* “More than 22% of online charitable donations are made on Dec. 30 and 31 each year, underscoring the extent to which tax considerations influence behavior.”

* Charities are very efficient, operating on a lean budget.  In fact a survey revealed 56% of charitable organizations operate in a deficit or at break-even.

* “The charitable deduction is unique in that it’s a government incentive to sacrifice on behalf of the commonweal.  Unlike incentives to save for retirement or buy a home, it encourages behavior for which a taxpayer gets no direct, personal, tangible benefit.”

For those who have read my posts, you know I have complained – repeatedly – about the unsolicited gifts (marketing expenses) of some charities.  But, on the other hand, as a single individual living in the District of Columbia ($$$$), I need every deduction I can claim.  And do I give as much as I do because of the deduction?  Absolutely.  Would I give less without the deduction?  Probably.

One final interesting fact from accompanying diagrams entitled “United States of Charity Deductions.”   41% of Maryland residents claim the charitable tax deduction, the highest percentage of filers taking charitable deduction.

And what state has the lowest percentage of filers taking charitable deduction?  West Virginia.


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