The “charity” deduction was created in 1917 to preserve America’s centuries-old tradition of philanthropy. It is the only section of the U.S. Tax Code that “rewards” a taxpayer for giving their resources away. Tax benefits for charitable contributions and tax-exempt organizations are approximately $100 billion annually.
Unfortunately, some political leaders see the charitable deduction as $40 billion in “lost federal revenue.” President Obama, former presidential candidate Mitt Romney, and the Bowles-Simpson Commission have proposed modifications that would decrease private giving.
Modifying or doing away with the charity deduction will disproportionately harm nonprofits that rely heavily on private giving. Even a 28% cap on charitable deductions, as some including President Obama have proposed, will lower total giving by $9.4 billion annually. Most donors won’t stop giving, but they will likely give smaller amounts and/or less frequently.