The Charitable Deduction

Over the past year, Obama's charitable deduction proposal has been a topic of contention for those in the non-profit sector. The charitable deduction was proposed as a means to alleviate the current deficit and provide funding for programs which would improve the current unemployment rate. Currently, the top income bracket is given a tax break of 35% on charitable donations. The charitable deduction would take this 35% down to 28%, a 7% decrease. This video, posted by the Chronicle of Philanthropy, clearly and simply explains what this could mean for donors, and how it could potentially effect their willingness to give. However, I would like to note that there is a visible bias in the information presented and this does not necessarily reflect my personal point of view.

The question for most of us is, whether or not this 7% cut will effect charitable giving. In an article by NPR from February 2011, they outline two ways of looking at the current charitable giving tax break: "To some, it's a subsidy for giving. To others, it's a much-needed incentive for people to give to nonprofits that provide services that the government either can't or won't." Depending on your side of the coin, you may see the charitable deduction proposal as having a more or less detrimental impact. Is the tax benefit a reward for generosity? Or rather a necessity to compensate for areas where the government is lacking service? If you support the latter, this 7% cut is comparable to school budget cuts or other areas where the government has cut funding in order to finance areas they deem more immediately necessary in this economic downturn.

However, before we all start to panic about this 7% cut, there is historical evidence to support the fact that a decrease in tax breaks for the wealthy will not significantly effect charitable giving. In the 1980's, President Reagan presented a similar deduction which resulted in minimal, if any, changes in charitable giving.

Ultimately, your decision on which side you take weighs on which issues you deem more immediately important. Should we work on our national fiscal situation now so we can solve the problems of the world tomorrow? Or are there greater, worldwide issues that cannot wait for us to climb out of our economical crisis? This moral quandary is one for you to decide.

For more specific information and detailed studies on tax breaks and their effect on charitable giving visit: http://philanthropy.com/article/Tax-PolicyGiving-A/129165/