Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. BACK TO DEDUCTING: There are multiple ways to tackle this idea. But the question that cuts to the core of the charitable deduction, for quite some time now, has been how much it gives (largely wealthy) taxpayers a benefit for something they might do anyway. The Republicans' 2017 tax law greatly reduced the number of itemizers, and thus the number of taxpayers claiming the charitable deduction — raising concerns among fundraisers everywhere that donations would take a dive. Now, did that happen? Contributions did decrease in 2018 when accounting for inflation, before increasing the next year. (The following year, 2020, was when the coronavirus upended all corners of American life.) As for the charitable deduction for non-itemizers, the Penn-Wharton Budget Model projected that policy would cost about $2 billion in 2020, while only spurring around $110 million in extra donations. (Most of the benefits also went to the upper-middle class and above, according to the Wharton model.) Still, charitable advocates say there's a strong case for allowing all taxpayers a write-off for their contributions. In fact, those advocates are pushing a bipartisan proposal in Congress that would greatly expand the charitable deduction for non-itemizers. (Not coincidentally, that bill would offer a deduction for non-itemizers of up to around $4,000 for single taxpayers and roughly $8,000 for joint filers, or basically what Independent Sector asked about in its new poll.) What those polling results show, according to Independent Sector's Ben Kershaw, is that voters want to empower charities, at a time when new disasters frequently seem to be popping up. And what of those questions about the effectiveness of the charitable deduction? Kershaw, the group's public policy director, argued that it can be difficult to figure out how much of changes in donations come from the deduction, and how much from other factors, like the overall health of the economy. But on the proposal to boost the non-itemizer write-off to $4,000, Kershaw maintained that "the lower the cap, the less effective the deduction." "The most effective way would be to give every American the same uncapped deduction," he told Weekly Tax. Looking ahead: So how exactly might nonprofit advocates be seeking to restore an expanded charitable deduction for taxpayers who use the standard deduction? You might think the preferred vehicle would be a year-end tax deal, as is the case for lots of industries seeking to revive or preserve favored tax incentives. But nonprofits are at least hoping they might get a chance even before the election. President Joe Biden asked Congress for $6.5 billion in disaster relief funding a couple weeks back, when wildfires and floods were raging in California and Kentucky, respectively. (Other problems include Jackson, Miss., residents being without clean water for weeks.) David Thompson of the National Council of Nonprofits said the sector was looking to restore the employee retention tax credit, also enacted by the CARES Act in 2020, for the final three months of 2021 after it was canceled early to help pay for the bipartisan infrastructure law. Nonprofits also want to bring back expired disaster-related incentives that allowed itemizers to write off charitable donations up to 100 percent of their gross adjusted income, while corporations could deduct a quarter of their taxable income. The National Council of Nonprofits updated a letter last week asking to bring back those tax breaks. But Thompson, the group's vice president of public policy, acknowledged the sector had to be realistic about what actually can happen during the heat of midterm season. "Doing nothing is the default so close to the election, sadly," Thompson wrote to Weekly Tax in an email, before adding that "many are working to generate the groundswell of support for restoring the expired natural disaster tax relief provisions."
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