WASHINGTON, D.C.— With the Senate Finance Committee focusing today on creating a tax system that is simpler, fairer and delivers much-needed tax relief to middle class families, the Charitable Giving Coalition (CGC) strongly encourages Chairman Orrin Hatch and members of the Committee to recognize how tax reform will affect charitable giving and consider proposals like the universal charitable deduction that support the American tradition of philanthropy.
Current tax proposals include an expanded standard deduction that will reduce the number of itemizers by nearly 30 million taxpayers. With so many taxpayers potentially no longer having access to the charitable deduction—which is a powerful motivator that prompts larger donations—the CGC is concerned that an unintended consequence of tax reform will be a significant reduction in giving.
According to a study commissioned by Independent Sector and conducted by Indiana University Lilly Family School of Philanthropy,* the proposal to increase the standard deduction would significantly decrease charitable giving by as much as $13.1 billion (4.6 percent). While not intentional, the loss of over $13 billion in charitable giving will cause a crisis for America’s communities as the resources for services provided by charities decline.
In response to this potential change, the CGC proposes enacting a charitable deduction for all American taxpayers, whether they continue to itemize or take the standard deduction. A “universal charitable deduction” would offset the loss in charitable giving and could prompt an increase in giving by $4.8 billion annually.
“The Charitable Giving Coalition urges Chairman Hatch and members of the Committee to recognize the potential impact of tax reform on giving and approve the universal charitable deduction,” said Jason Lee, interim president and CEO of the Association of Fundraising Professionals and chair of the CGC. “Philanthropy is a critical part of American culture and history, and a $13 billion loss in giving is a serious loss to communities across the country.”
With the latest U.S. Census figures showing that middle-class households are only now seeing their income reach 1999 levels—and with economists concerned that recent gains may not continue—a universal charitable deduction is easy for taxpayers to use and will provide tax relief for families across America who give to charity but don’t itemize their taxes.
“A universal charitable deduction simplifies the tax code and promotes fairness,” stated Brian W. Walsh, executive director of the Faith & Giving Coalition.
The public response to recent natural disasters reinforces the American tradition of giving. The “Hand in Hand Benefit for Hurricane Relief” telethon on Tuesday that raised over $44 million in one evening is just one illustration. “Hand in Hand” is just one of many fundraising efforts, small and large, collecting donations and distributing them to a broad cross-section of relief providers in the areas ravaged by Hurricanes Harvey and Irma. From individual gifts and small giving circles to the “One America Appeal” being led by all five former living presidents of the United States, the best of our American ethos to collectively support our communities is in action.
The universal charitable deduction for all American taxpayers will retain—and unlock additional—charitable giving, helping to keep our charities and the communities they serve strong.
“This commonsense tax policy change would ensure that we preserve America’s longstanding tradition of philanthropic giving in the context of tax reform during a year when we are celebrating the 100th anniversary of the charitable deduction,” noted Steve Taylor, senior vice president and counsel for public policy of the United Way.
*Tax Policy and Charitable Giving, Results, May 2017, Indiana University Lilly Family School of Philanthropy Study commissioned by Independent Sector. https://www.independentsector.org/wp-content/uploads/2017/05/tax-policy-charitable-giving-finalmay2017-1.pdf