The cynical among us might wonder about legislation introduced last week, the Universal Giving Pandemic Response Act, which is endorsed by a bipartisan group of U.S. senators. After all, a crisis such as the pandemic can be the time when causes find convenient new rationales. But the proposal to increase the so-called “above-the line” income tax deduction for charitable giving, currently set at a meager $300 for those who don’t itemize their tax returns, is a bona fide response that will help organizations which have, under duress, expanded their purposes to include helping those whose lives and livelihoods have been affected by COVID-19.
Even if this bill doesn't make it to the Senate floor, lawmakers should seriously consider making it a part of a potential phase four coronavirus relief package. After all, charitable and nonprofit organizations for years have assisted and lifted up our most vulnerable members of society, and amid the current crisis, more Americans than ever are showing up in need at their doors.
The proposal — sponsored by Sens. James Lankford (R-Okla.), Chris Coons (D-Del.), Mike Lee (R-Utah), Jeanne Shaheen (D-N.H.), Tim Scott (R-S.C.) and Amy Klobuchar (D-Minn.) — would increase the charitable deduction to up to $4,000 for individual filers and $8,000 for those filing jointly. Keep in mind, one must actually donate that much to a charity to qualify. In other words, this is no tax loophole. The background, however, involves not only the COVID-19 pandemic but the most recent tax reform bill that went into effect in 2018. That law, by significantly increasing the standard deduction for all taxpayers, greatly reduced the tax incentive to give to charity for all but those in the top income groups. Until the CARES Act was passed, if you did not itemize your taxes, you could not claim a charitable deduction. (CARES made possible the $300 above-the-line deduction.)
Indeed, the Tax Foundation has estimated that only 13.7 percent of taxpayers will have itemized their tax returns for 2019 — a decline of more than 17 percent compared to those who itemized before tax reform. The drop is estimated to be especially large for those in the middle-income range.
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