Should charitable contributions be tax deductible?

CBO outlines 11 options for reforming the tax treatment of charitable contributions, 9 of which are designed to lessen the revenue lost from how the current tax code treats such contributions. The tax subsidy in 2006, the year CBO used for their detailed simulations, was 40.9 Billion on total contributions of 203 Billion.  CBO also estimates the impact of two policies (options 3 and 6) that would expand the tax benefits of charitable giving, by extending them to taxpayers who do not itemize deductions. Table 3 provides the essential overview:

The bottom line of this detailed analysis is that for the 9 options simulated that would lessen the current tax preference provided to charitable giving, CBO finds that the deficit reduction achieved is larger than the subsequent reduction in charitable giving. None of these reforms would eradicate our budget deficit by any stretch, but they would be a move toward balance, and charitable contributions would not decline by that much.

In the budget talks that are ongoing, tax reform may be the only politically possible way in which to raise revenue. While most everyone says they want to reduce the deficit, and many say that we need tax reform, once you get down to ending specific subsidies in the tax code, most people head for the hills (well, not that tax preference….). It is unimaginable to me that a reduction in the tax preference of charitable giving could pass both Houses of Congress as a stand alone measure. As part of a larger package, then maybe. That is why a bigger tax reform deal seems more likely to me than a small one, though I wouldn’t bet the farm on either.

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

3 Responses to Should charitable contributions be tax deductible?

  1. Floccina says:

    This got me to think perhaps if medical care were dominated by charities (I think it once was)(maybe mutual aid societies) we could reach the optimal amount of care as donors would think about amount of care that everyone needs more than just demanding what they want.

  2. Beth Haynes, MD says:

    So being allowed to keep more of your own money is a subsidy?

    Taking away the tax exemption for charitable giving removes that money from personal value choices and makes it subject to the politicized process of special interest wrangling. Hardly a step in the right direction if you think people should be in control of their own lives.

    I would much rather see the end of tax exemptions for mortgage interest and medical expenditures. If we are going to have social engineering in the tax code, charitable giving is the first thing to support not the first thing to take away.

  3. I was just looking for this information for a while. After 6 hours of continuous Googleing, finally I got it in your website. I wonder what is the Google’s problem that does not rank this type of informative websites closer to the top. Normally the top websites are full of garbage.

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