Let's not change the charitable deduction!
PEOPLE associated with every church, synagogue, college, museum, hospital, and voluntary fire department in the United States quietly have their fingers crossed hoping the Treasury Department's proposal to sharply limit the federal tax deduction for charitable contributions will not be adopted. Most Americans are on their side. The New York Times and CBS found in a recent national survey that over 80 percent of Americans want to keep the deduction for charitable contributions. The Fair and Simple Tax simplification proposal which Rep. Jack Kemp and I have introduced would retain the current deduction for charitable contributions.
In the weeks ahead, sponsors of several tax simplification plans -- including the Reagan administration -- will be working together to develop a consensus toward comprehensive reform of the federal tax code. We do not need radical change, just an overhaul that will return fairness and simplicity to our tax system.
But we also need common sense in recognizing that parts of the tax code are working well. We must not destroy our tax-policy successes. And the retention of the charitable deduction fits squarely into the success category.
The Treasury Department's proposal would allow no charitable deduction until giving exceeded 2 percent of income; it would do away with the provision that permits non-itemizers to deduct contributions; and it would limit the deductibility of gifts that have increased in value.
One study has shown that the average taxpayer gives just under 2 percent of his income to charity. Voluntary support for virtually millions of important projects and services being provided across the country would be threatened should the Treasury proposal be adopted.
The Treasury itself has shown that its plan would reduce giving by almost $10 billion a year (or by 17 percent). A reduction of this size would represent more than five times as much as was contributed to United Way drives all across the country last year. Other studies, such as the one done by Prof. Larry B. Lindsey at Harvard, predict even greater declines in charitable contributions.
As we move to reduce deficits and bring federal spending under control, there is growing public support for, and also dependence upon, voluntary participation in the funding of services to our citizens.
We must maintain and protect incentives for giving. If charitable contributions are reduced by 20 percent -- or more -- who do we think will make up the difference? Who will pay the bills in our neighborhood associations, colleges, museums, hospitals, churches, and other agencies and institutions that currently play an important role in America and are funded to a significant extent through the gifts of our citizens?
Federal tax reform is an idea whose time has come. But the charitable deduction has served us well as an incentive for private giving for the public good. We must keep it.
Sen. Robert W. Kasten Jr. (R) of Wisconsin is a member of the Senate Budget and Appropriations Committees and co-author of the Kemp-Kasten tax reform proposal.