As the federal government looks to address the country’s looming $1.3 trillion budget deficit, lawmakers are looking at drastic budget cuts and other creative ways to reduce America’s debt.
A surprising policy that may be on the chopping block? Tax deductions for charity donations.
In their proposal released last week, Obama’s bipartisan budget committee suggested several ideas for reducing charity tax breaks.
Co-authors Democrat Erskine Bowles and Republican Alan Simpson suggested three ways this could work. One possibility is raising the bar for what donation amounts can be written off.
The Chronicle of Philanthropy reports:
They said one option was to set a floor of 2 percent of adjusted gross income. In other words, taxpayers could not get deductions for any dollars spent on charity below that level.
Another recent deficit reduction plan, this one proposed by the Bipartisan Policy Center, took it one step further.
In their “Restoring America’s Future” proposal released this week, the Debt Reduction Task Force spearheaded by Dr. Alice Rivlin and Senator Pete V. Domenici made budget suggestions that included axing the current charity tax break system.
Instead, they proposed a system of tax credits given by the federal government to charities.
The Chronicle of Philanthropy reports,
In its place, all donations made by federal taxpayers would qualify for a 15-percent tax credit. But instead of that credit going to the taxpayer, it would be given to the charity receiving the donation in the form of a matching grant from the Internal Revenue Service.