Tax Deductible Charitable Donations To Be Capped or Eliminated?

The federal government is dead broke and looking for ways to fix its debt problem. A new indication is the tax deduction for charitable donations may be capped or eliminated.

The United States has a huge debt problem. While we owe a reported $14 trillion plus at the time of this writing, the truth is we are facing a total debt in excess of $100 trillion over the next 20 to 30 years. The numbers are so staggering, it is nearly impossible to figure out how we are going to get out of this mess. 

The clear answer is we are going to have to make some hard decisions. The first step is to deal with the annual deficit. It is currently $1.6 trillion. If we can get that down to zero, then we can start addressing the long term problems. Unfortunately, it is nearly impossible to figure out how we are going to pull this off. To say there are going to have to be some hard choices made is a major understatement.

How hard are we talking about when it comes to choices? Very. Consider this simple fact. If they government stopped spending money on every single thing but the military, Medicare and Social Security, we would still be running an annual deficit. Yes, that scary. Given the difficulties, politicians are looking far and wide to come up with solutions. 

There is no single solution that will save. Instead, we are looking at slashing spending and raising taxes. This is where charities must be worried. Over 30 percent of all charitable donations are made by “the rich”. President Obama and Congressional Leaders are now considering whether it might make sense to cap or eliminate any deduction that the wealthy would get from making donations. 

There are no hard numbers yet, but this is really an odd idea. The deduction the wealthy get is paltry compared to our debt. Gaining that tax revenue is really going to do nothing much for us. In turn, taking these actions would appear to hurt charities since a certain percentage of the “rich” would just skip making donations. Instead of a win-win, this seems more like a lose-lose.