Charitable Deduction and the Budget

The income tax deduction for charitable giving has been an important element of budget debates in Washington over the last few weeks. Most recently, the President’s Fiscal Year 2014 Budget proposed to limit the value of the charitable tax deduction for high income donors. Specifically, the White House would cap the value of itemized deductions at the 28 percent tax rate, which would result in those donors in the 33, 35, and newly created 39.6 percent income tax brackets being taxed more on the money they give away to charitable causes.

NRB President & CEO Dr. Frank Wright expressed disappointment and alarm in this proposal. “The charitable deduction is a century-old proven success,” he said. “Diminishing its value would essentially commandeer voluntary donation money away from important ministries and into federal coffers, ultimately to the detriment of the communities those ministries serve.”

Similarly, in response to the President’s references to unhelpful loopholes, the Charitable Giving Coalition declared, “The charitable deduction is not a loophole, it’s a lifeline. It serves an invaluable economic purpose, supporting worthy causes and the nonprofit sector…. The charitable deduction is different than other itemized deductions because it encourages individuals to give away a portion of their income to benefit others, not themselves. It rewards a selfless act and allows a way for donors to give more than they otherwise would have.”

In a contrary move, two key Republican Senators spoke out for the charitable deduction in the Senate’s earlier FY2014 Budget debate. Senator John Thune (R-SD) and Senator Roy Blunt (R-MO) introduced an amendment intended to prevent the charitable deduction from being diminished for the purpose of increasing government spending. Noting a study indicating that the President’s proposed cap could decrease charitable giving by $9.4 billion annually, Senator Thune declared, “We ought to be exploring new options to expand charitable giving rather than limiting the charitable donations in order to fund higher levels of government spending.” Senator Blunt added, “Senator Thune mentioned $9 billion. Now, $9 billion of $300 billion, does that sound like a lot? It sounds like a lot to the kid who got the last scholarship. It sounds like a lot for the park that doesn’t get the new playground equipment because the local Kiwanis club could not get to their goal so they could help their community…. This is a part of who we are that we don’t want to discourage. There is a reason Americans give more generously to charitable causes than anybody else in the world. Let’s not walk away from that.”

     • Find the President’s Fiscal Year 2014 Budget.
     • Watch Senator Thune and Senator Blunt speak up for the charitable deduction, or read
       the transcript.

By Aaron Mercer, Vice President of Government Relations 

Published: April 12, 2013