CBO Testimony On Alternatives To Current Charitable Tax Deduction

CBO Testimony "Options For Changing The Tax Treatment Of Charitable Giving" before the Committee on Finance, United States Senate on October 18, 2011:

At current levels of charitable giving, the cost of that deduction—measured as the additional revenues that could be collected if the deduction was eliminated—will total about $230 billion between 2010 and 2014, according to the Joint Committee on Taxation (JCT).***Allowing all taxpayers to claim a deduction for charitable giving would have increased donations in 2006 by an estimated $2.0 billion (or 1 percent) and increased the total tax subsidy by $5.2 billion (or 13 percent) from the 2006 amounts. Combining a deduction for all taxpayers with a floor, however, could both increase donations and decrease the tax subsidy. For example, such a deduction combined with a fixed dollar floor of $500/$1,000 would have increased donations by $800 million in 2006 and decreased the tax subsidy by $2.5 billion.

Replacing the current deduction with a 25 percent tax credit would increase donations and also increase the government's forgone revenues. Combining such a credit with certain contribution floors, however, could boost donations while reducing the tax subsidy or could decrease donations by a small percentage while reducing the tax subsidy by a large percentage. Setting the credit at 15 percent would reduce donations but would reduce the tax subsidy by a larger amount (both in dollars and as a percentage change).

Read the complete CBO summary here, the complete testimony here or on Scribd here.

Options for Changing the Tax Treatment of Charitable Giving