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Monday, December 17, 2012

WSJ: Should We End the Charitable Deduction?

WSJWall Street Journal Special Report:  Should We End the Tax Deduction for Charitable Donations?:

The deduction for charitable donations looks like a very tempting target as Washington seeks new revenues.

For all the praise it gets, there's just no evidence that the tax break leads people to increase their giving—but it does lead them to make bad choices about giving. What's more, it favors a segment of the public, the very wealthy, that can afford to give without a break. And cutting the deduction does a lot less economic harm than other ways of raising tax revenue.

To be clear, I feel strongly that the best way to help charities is to boost economic growth, which leaves people with more money to donate. And I think the best way to do that is to replace our current system with a simple and fair flat tax. But even without that radical change, I don't think there's a compelling argument for the charitable deduction.

Limiting the charitable deduction would be a tremendous mistake with potentially catastrophic consequences for groups that do good.

This bit of tax law is a crucial incentive that gets people to give, and give deeper than they otherwise would. Limiting it—or worse yet ending it—would rob funds from nonprofits at a time when charities are already struggling to meet increased demand for programs and services. It would also curtail one of the few government policies that encourages people to be generous with their money instead of using it for their own gain.

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Comments

Charitable contributions are the most voluntary of itemized deductions, and, for that reason alone, least entitled to a federal tax subsidy.

Posted by: Jake | Dec 17, 2012 6:16:01 PM