Changes to Charitable Deduction, Federal Income Tax Rates Would Hurt Nonprofit Organizations

-For Immediate Release-
April 24, 2013

Contact: Brian Gumm,, 202-683-4812

Changes to Charitable Deduction, Federal Income Tax Rates Would Hurt Nonprofit Organizations

Damage Could Be Comparable to Sequestration

WASHINGTON, April 24, 2013—In an analysis released today, the Center for Effective Government finds that proposals to limit tax deductions for charitable giving and to consolidate and lower federal income tax rates would hurt nonprofit organizations. Both approaches would decrease Americans' incentives to give to their favorite charities.

The analysis concludes that President Obama's plan to limit the deductibility of charitable contributions to 28 percent and other tax reform proposals, like Rep. Paul Ryan’s (R-WI) plan, that lower income tax rates would significantly decrease the amount of charitable giving in the United States.

Patrick Lester, Director of Fiscal Policy and the author of the analysis, said, "Charities are important institutions that serve valuable public purposes, and they play a critical role in implementing many public programs. The current tax reform proposals being discussed in Washington would do substantial harm to these organizations and the people they serve."

Specifically, the president's proposal would likely reduce charitable giving by $4.7-9.1 billion every year. Ryan's plan would have a higher impact, with a $6-11 billion reduction in giving annually. For charities, the damage could be comparable to across-the-board federal spending cuts, called sequestration.

The analysis lays out better options for increasing revenue, including:

  • Eliminating tax breaks that encourage corporations to shift jobs and profits overseas (would raise between $221-606 billion over ten years)
  • Imposing a small tax on Wall Street trades ($353 billion over ten years)
  • Eliminating the tax loophole that allows the wealthy to avoid capital gains taxes when bequeathing assets to their heirs (about $500 billion over ten years)

If Congress insists on pursuing tax policies that lower rates or limit the charitable deduction, policymakers should consider changing the tax deduction for charitable giving to a tax credit. Doing so would better shield charitable giving from changes in the tax code.

Lester concluded, "As Congress considers changes to the existing federal tax code, it should take care not to implement changes that will substantially reduce charitable giving."

The full analysis is available online at A related chart from the analysis is available at

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The Center for Effective Government is dedicated to building an open, accountable government that advances the priorities defined by an informed citizenry. Find the Center for Effective Government on Facebook and Twitter.

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