Giving Compass’ Take:
• This Urban Institute article (from 2017) takes up the debate about charitable tax deductions, giving a little historical perspective for how a universal deduction might work.
• There are upsides and downsides, but the upshot is that “democratizing” philanthropy will require thoughtful policy, and input from a diverse set of voices.
The Filer Commission was fueled by the charge to democratize philanthropy, or “broadening the base of philanthropy.” It recommended extending the charitable deduction to nonitemizers. But the commission also believed that “an additional inducement to charitable giving should be provided to low- and middle-income taxpayers.” So the commission proposed a “double deduction” for families with incomes less than $15,000. These families could deduct twice what they gave to charity.
Even this did not go far enough for some on the commission. These members proposed a tax credit as a more equitable instrument to broaden philanthropy’s base. Their ranks included John D. Rockefeller III, who backed a flat charitable tax credit of $50 offered to every citizen.
The Donee Group, representatives from social justice groups who sought to push the Filer Commission in a more progressive direction, also issued recommendations. They supported the universalization of the charitable deduction, but they argued it didn’t go far enough to democratize giving.
Because the expanded deduction offered greater tax benefits to high-income people, it “reverse[d] the progressivity of the income tax.” So the Donee Group recommended that on top of the charitable deduction, “a 100 percent tax credit for a modest but not insubstantial amount” (the group suggested $100) should be offered to low-income adults. They also suggested that, as an alternative to taking the charitable deduction and as a means of reducing inequities, a tax credit equal to 30 percent of the amount contributed should be available to itemizers and nonitemizers alike.
None of these recommendations gained traction, and all would have been challenging to implement. But beyond the policy models they offer, the Filer Commission deliberations are worth reflecting upon as a reminder of the limits of the charitable deduction as an instrument to democratize philanthropy.
Read the full article about expanding the charitable deduction to all taxpayers by Benjamin Soskis at Urban Institute.
Impact Philanthropy is a complex topic, and others found these selections from the Impact Giving archive from Giving Compass to be good resources.
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