The dreaded April 15th, 2014 tax day is almost upon us. As most of us hustle to make sure we file our returns on time, there is a healthy debate happening that can affect how we all file our taxes. The U.S. is one of the most charitable countries in the world (tied for 5th by the World Giving Index rankings) with 64% of its population donating to charities. On average giving in the U.S. totals around $300-billion every year. One of the motivating factors for charitable giving are the favoriable tax breaks for individuals that give. However, do the current tax code benefit all who give equally? Thomas Peters, the chief executive of Marin (Calif) Community Foundation does not think so.
"Two-thirds of American taxpayers do not itemize deductions," writes Peters, "This means that the vast majority of donors are not entitled to this robust tax subsidy. And yet if charitable intentions are measured by proportion of income, they are giving just as generously as the top third." By claiming a standard deduction, Peters fears, the majority of Americans are not receiving the same tax benefits the wealthiest Americans receive.
Peters includes a proposal from the Committee for a Responsible Federal Budget that he believes will even the playing field by giving all taxpayers a tax benefit (or credit) without having to itemize their charitable giving. He believes this will "establish equity and increase giving."
Peters' critics are plentiful. They say that the majority of Americans--the bottom half of income earner--only represent 2% of U.S. tax revenue. Any change, they argue, will not even the playing field and further drive the U.S. into a deficit. Further, the proposal the Committee for a Responsible Federal Budget has put forth requires a minimum donation amount to receive the deduction. Therefore, is this in essence any different than the current tax code?
"The country can ill afford to discourage the giving of families whose financial support of a wide range of social, cultural, and environmental causes is more critically necessary today than ever before," argues Peters. The U.S. tax code is one of the most convoluted in the world, therefore any healthy debate on the matter can only benefit all tax payers. And as Peters says, "the time is now for a fresh approach," so the more informed all Americans become of the tax code the chances to even the playing field improves significantly.