Tax Analysts Blog

The Charity Deduction and Big Government

Posted on Apr 16, 2013

When you filed your tax return, did you claim a deduction for charitable giving? Chances are pretty good that you did, since roughly 80 percent of itemizers do.

The charity deduction is one of the oldest provisions of the income tax, dating from 1917. And over the years, it’s also been one of the most popular, winning support from large majorities in numerous opinion polls.

As a result, the deduction’s place in the tax code has always been pretty secure. In recent years, there's been some hand-wringing in the nonprofit sector, thanks to President Obama’s repeated effort to cap the value of itemized deductions for high-income taxpayers. If enacted, such a change would presumably diminish the incentive to give.

But even were Congress to pursue that idea, it seems likely that charity deductions would get a pass: support for preserving the deduction in its current form runs strong on both sides of the aisle.

Still, nonprofit advocates might be forgiven if they're nervous. At various times, the charity deduction has been scaled back or otherwise limited, chiefly in the name of simplification and revenue raising. In 1986, for instance, lawmakers eliminated the deduction for non-itemizers, after having extended it to the standard deduction crowd just a few years earlier.

But perhaps the most significant threat to the deduction came in 1944, when lawmakers actually created the standard deduction in the first place. As I explain in a recent paper for the Urban Institute’s Tax Policy and Charities project, the standard deduction struck many charity advocates as a mortal threat.

By giving people a general deduction rather than requiring them to itemize their contributions, lawmakers were eliminating the incentive to make donations, insisted charity representatives. “In effect,” wrote one critic, “this [the standard deduction] completely abolishes deductions for church and charitable contributions, since it is a valid abatement to everyone regardless of whether or not the contributions have actually been made.”

In fact, some lawmakers considered the standard deduction to be little more than a thinly veiled plot on behalf of big government. “Can it be possible that the master minds behind the scenes who determine the policy for the Treasury Department and all other branches of government want to cripple all of these worth-while institutions so they must come to the Federal Government for a subsidy?” asked Rep. Carl Curtis, R-Neb., on the floor of the House of Representatives.

“This New Deal administration which is nourished and fostered in the philosophy of big government and little individuals is marching along with a tax bill that treats American wage earners in herds and not as individuals,” Curtis concluded. “It is un-American. It is totalitarian. It is discriminatory.”

That sort of intemperate language is uncommon today, at least in debates over the charity deduction. But it’s a useful reminder that the charity deduction strikes many of its defenders as not simply wise but indispensable. If charities are a bulwark against creeping statism, then the charitable deduction isn't just good for nonprofits -- it's good for American freedom.

Read Comments (1)

amt buffApr 16, 2013

I never would have guessed that 20% of Americans, let alone 20% of taxpayers
with enough income to itemize, give nothing at all to charity.

In my opinion the deduction for charitable contributions is in recognition that
most charities save the government money.

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