CBO Study Says Nonitemizer Deduction a Nonstarter for Fundraising - Nonprofit Issues

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Published: 12/23/2002

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CBO Study Says Nonitemizer Deduction a Nonstarter for Fundraising

A study released by the Congressional Budget Office (CBO) on December 17, Effects of Allowing Nonitemizers to Deduct Charitable Deductions found that allowing nonitemizers to claim a deduction for charitable contributions would be unlikely to increase the level of giving by more than 4 percent. The findings are similar to a Congressional Researech Service report earlier this year.

The study examined four possible versions of a nonitemizer deduction, including an unlimited charitable deduction, a ceiling on the amount to be deducted, a floor amount to be contributed before the deduction becomes available, and a requirement that deductions be based on a fixed percent of income. They found allowing deductions above a floor amount would raise the most in contributions. All of the proposals would primarily reward taxpayers for existing behavior, while reducing federal revenues in amounts exceeding the benefits.

The nonitemizer deduction is a feature of the President’s faith-based initiative, and was included in legislation that recently failed to pass Congress. Since the President has implemented the grant rules portion of his initiative through Executive Order, it is unclear if he will push for legislation in the next Congress, and if that would include charitable giving incentives. However, he continues to propose permanent repeal of the estate tax, a tax incentive that produces significant charitable contributions. For more information on the estate tax see About the Estate Tax on our website.