The President’s Tax Proposal Would Cripple Charities

President Obama proposed once again that Congress reduce the federal itemized tax deduction for charitable contributions. He argues that people don’t give to charity to get a tax deduction and increased revenue could pay for other things (in the latest instance, his Jobs Act).

“I’m assuming that that shouldn’t be a determining factor as to whether you’re giving that $100 to the homeless shelter down the street,” the president said in 2009.

A tax deduction is not the motivating factor for most people who give. But lower taxes are an empowering factor. How much you give has a lot to do with how much you can give. Charitable giving is discretionary. If you pay more in taxes, it stands to reason that that money will be made up somewhere else in your budget.

Brian Gallagher, president of United Way Worldwide, notes that Obama’s proposal would reduce charitable giving by $2.9 to $5.6 billion per year, according to one study.

“That equates to eliminating all of the private donations each year to the Red Cross, Goodwill, the YMCA, Habitat for Humanity, the Boys and Girls Clubs, Catholic Charities, and the American Cancer Society combined,” Gallagher said.

State budgets for social services and safety nets are stretched, charities are struggling, and needs are increasing. The Senate was wise to reject using the charitable tax deduction as a chance to raise taxes on Americans who are voluntarily and generously stepping up to meet those needs during a recession.

Kathryn Hickok is Publications Director at Cascade Policy Institute, Oregon’s free market public policy research organization. (Disclosure: Cascade Policy Institute is a charitable corporation that benefits from donors being able to deduct their contributions.)