The Alliance for Strong Families and Communities has previously spoken out about the Administration’s tax plan, the Unified Tax Reform Framework, and its potentially negative impact on charitable giving. The proposal doubles the standard deduction, which could cause a drop in the number of itemizers to just five percent of all tax payers (based on 2016 data, that would leave 30 million taxpayers without an incentive to give). This in turn could mean a significant drop in contributions since fewer people will give to charities without a tax incentive to do so.
A recent study from the Independent Sector estimated donations could drop by more than $13 billion per year as a result. Research has consistently shown that people do give more when they are incentivized to do so through the tax code. In 2015, Americans gave nearly $265 billion to charitable organizations, a record amount. Studies have shown that for every $1 subject to the charitable deduction, communities see $3 in benefits. The nonprofit human services sector generates an estimated $1.1 trillion every year by providing human services in partnership with government. In response to concerns about the potential drop in charitable giving, Representative Mark Walker (R-NC) introduced H.R. 3988, The Universal Charitable Giving Act of 2017, which would enable individuals and married couples who don’t itemize the opportunity to take a deduction for up to one third of the amount of the standard deduction. Those who do itemize would receive the current level of deduction.
While the Alliance supports additional incentives that encourage more Americans to invest in their communities through charitable giving, we would prefer moving toward a universal version of the charitable tax deduction—one that all tax payers could access whether they itemize or not. In fact, the Independent Sector study found that expanding the charitable deduction to non-itemizers would erase the $13.1 billion deficit and produce a net gain in total giving of up to $4.8 billion a year. Expanding the charitable deduction to all taxpayers would meet key goals of tax reform by treating all taxpayers fairly and by providing a greater incentive for low and middle-income taxpayers.
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