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In the past, taxpayers who itemized have been able to deduct the full amount of their state and local property, sales and income taxes from their federal taxable income. But the recent tax legislation capped the amount of state and local taxes that can be deducted at $10,000. As a result, some taxpayers will see their taxable income, and thus their taxes, increase.
The independence of civil society rests on the premise that government and charity are two very different things, and the existence of the charitable deduction is in part a reflection of this division.
Some politicians in California, Maryland, and New Jersey (so far – others may follow) want to allow taxpayers to give money to a special fund set up by the state, ostensibly charitable in nature. Donors to the fund would receive tax credits on a dollar-for-dollar basis that could be used to offset state income tax liabilities. The money coming into the state’s coffers wouldn’t change, the money sent to the state by the taxpayer wouldn’t change, but – and here’s the whole purpose of this maneuver – the money given to the state would be deductible for federal tax purposes as a charitable contribution.
What is being proposed in California and elsewhere would blur the two, and suggest that government and charity are the same, or at least sufficiently indistinguishable in that sending money to the former is little different than sending it to the latter.
Read the full article on taxes and charitable giving by Sean Parnell at Alliance For Charitable Reform