October 19, 2011
The Future of the Charitable Contributions Deduction
As previously blogged (see here), the Senate Finance Committee held a hearing yesterday to discuss the future of the charitable contributions deduction. As reported by numerous news sources (see two articles, here and here), most of those who testified on behalf of charitable organizations argued that any floor or cap on the charitable contributions deduction would result in a significant decrease of charitable contributions, a potentially devastating result to the nation's charities. Frank Sammartino, a tax analyst at the Congressional Budget Office, conjectured that Obama's plan (limiting the deduction to 28% of high-income taxpayers' AGI) would likely reduce higher-income-taxpayers' contributions, but offered no hard estimates. The President's National Commission on Fiscal Responsibility and Reform (see its report here) has proposed a tax credit for charitable contributions exceeding 2% of a taxpayer's AGI.
Senator Max Baucus, Chair of the Senate Finance Committee, raised the common counterpoint - namely, that most taxpayers do not itemize their deductions and, therefore, do not accrue any tax benefits for their charitable contributions. The result, he opined, was that some charities receive larger amounts of contributions because they attract high-income taxpayers who achieve the largest tax reductions. "Let us encourage charitable giving in a way that is fair and efficient," he proferred before leaving the hearing.
In addition to potential reform of the charitable contributions deduction, other topics discussed at the hearing included the deduction for household goods and services, donations in support of the arts, and tax benefits provided to supporting organizations.
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