How the Charitable Deduction Benefits the Rich
'Average Americans paying for billionaires' generosity,' writes Fred Hiatt
By Evann Gastaldo, Newser Staff
Posted Dec 3, 2012 1:45 PM CST
These handout images provided to The Associated Press by the White House shows President and Mrs. Bush's 2007 federal income tax forms.   (AP Photo)

(Newser) – A call to limit the charitable deduction may sound heartless—what about all those churches and museums and schools and nonprofits?—but the deduction actually benefits the rich, while "the rest of the country has to make up the gap," writes Fred Hiatt in the Washington Post. A few examples:

  • If you're in the highest tax bracket, a $10 million donation will lower your federal taxes by $3.5 million. But if you're in a lower tax bracket, your deduction will also be worth less: For someone paying at a 15% rate, that same $10 million would only lower federal taxes by $1.5 million.
  • Seventy percent of Americans don't itemize, so they get no benefits from their charitable donations. One study finds taxpayers reporting income of less than $50,000 accounted for 19% of donations—but got just 5% of the tax subsidy.
  • Plus, donations can help the very rich avoid capital gains tax, if they are made with stock that has increased in value.

"Essentially, average Americans are helping to pay for our billionaire’s generosity, though of course they have no say in where his charity goes," Hiatt writes. Any attempt to limit the charitable deduction is met with howls of protest, but we all must remember that "there are few easy targets in the tax code." Do we really want to kill the American dream by killing the mortgage interest deduction, or harm education by limiting the state and local tax deduction? But if we're serious about eliminating loopholes, we're going to have to make some distasteful choices. Click for Hiatt's full column.

More From Newser
My Take on This Story
To report an error on this story,
notify our editors.
How the Charitable Deduction Benefits the Rich is...
Show results without voting
You Might Like
Showing 3 of 39 comments
Dec 4, 2012 9:23 AM CST
In case you haven't noticed, EVERYTHING benefits the rich.
Dec 4, 2012 8:14 AM CST
Thorny issue. What will make up the lost revenue?
Dec 4, 2012 7:43 AM CST
I love paying income taxes.. That means I have had income.. And income is actually a GOOD thing.. The Goverment needs it to pay all the teet suckers. Charities Loves Getting Donations. I hope the rich get some really good tax benefits.. I hope the rich do MUCH MORE for charities..