Thursday, December 20, 2012
One option for reforming the IRC is to limit the amount of charitable deductions that a taxpayer may take in a given year. However, some people argue that if Congress were to limit the number of charitable of deductions, it should only be for charitable deductions made under the federal estate and gift tax. If Congress were to take this particular route, they could meet both of their primary goals. This move would increase revenue while ensuring that Congress could still provide an incentive for people to make charitable contributions.
In addition, a limitation on the amount of charitable deductions that a person could make under the estate and gift tax code would only affect the largest estates. Under a plan like this one, Congress could limit the amount by creating a deduction with a particular amount cap. For example, Congress could create a law that states that "the first $10 Million of charitable bequests could by fully deductible for estate tax purposes and only the amount gifted over that threshold would be deductible in part." Congress could also choose to create a progressive charitable tax deduction, where the amount that taxpayer can take as a deduction decreases as the amount that taxpayer donated increases. All of these propositions could be implemented while keeping Congress' primary goals for tax reform in mind.
See Edward Zelinsky, Limit the Estate Tax Charitable Deduction, OUPblog, Dec. 19, 2012.