Charitable tax deduction: What price for love?
In weighing tax reform, Congress has its eye on the charitable tax deduction – as a 'loophole.' It needs to first look at the changing ways that Americans give and then act to safeguard charity in all its forms.
Last week on Valentine’s Day, amid Washington’s noisy politics over the “sequester,” a House panel on taxation held a rather serious hearing on the cost of love – specifically, the cost of the tax deduction for charitable giving.
In the Senate, too, the Finance Committee is moving ahead on tax reform with the tax break for charity in its sights.
As one of the leading nations for private giving, the United States cherishes this tax “loophole,” as its critics call it. The US has more than 1 million charities with about $1.5 trillion in yearly revenue. More than 38 million Americans use the tax deduction, which, if it were not available, would add an estimated $40 billion to the federal budget.
Billions in dollars, of course, are given away daily in ways that Uncle Sam never sees and aren’t usually deductible – to the homeless on the street, for example, or a friend in need. The poor give away a greater portion of their earnings than wealthier folks yet without reaching the income level to tap the charitable deduction.
Also less visible are the ways that giving itself is changing in America, a point that Congress must consider as it rethinks how to treat the monied act of private altruism.
Take crowdfunding, the small-scale investments made to start-ups via the Internet. This booming trend isn’t used only for profit enterprises. Nonprofit “social entrepreneurs” are tapping strangers over the Web in ways that could bring unforeseen changes in society.