It Is No Secret Thatu.s Tax Code Essay

It Is No Secret Thatu.s Tax Code Essay

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It is no secret that U.S Tax Code has built in mechanisms for encouraging behavior of its residents and citizens through tax payment incentives. One very pervasive and well known item is the charitable deduction. According to the Senate Finance Committee Staff Tax Reform Options for Discussion, ideas such as fairness and “Low bang-for-the-buck” are essential in the consideration of tax reform policy.
Regarding fairness, the charitable deduction involves a reduction in taxable income of the fair market value of assets donated (or the amount of cash if given) up to fifty percent or thirty percent of the taxpayers adjusted gross income for public charities and private foundations, respectively. The Senate Finance Committee Staff Tax Reform Options for Discussion does well to point out that a taxpayer benefits more from this deduction as their income increases. It would seem that the deduction is unfair for lower income taxpayers as their wealthier counterparts will receive a higher reduction in tax liability (Senate Finance Committee Staff, 2013).
Additionally, it would appear that the current deduction can use some scrutiny regarding how much bang society is getting for the buck. According to the Committee for a Responsible Federal Budget, opponents argue that only one-third of charity is going to the poor due to cash being directed toward projects that are not government priority or do not represent what is traditionally thought of as charity (Committe for a Responsible Federal Budget, 2013). In effect, the tax bill is being reduced without potentially the kind of potential output that society can benefit from as a whole. It would seem between the notions of fairness and the magnitude of output, the current charitable deduction ...


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...on that “taxpayers be allowed to sell property without recognizing gain and receive a full charitable deduction if the entire sales proceeds are donated to a charity within 60 days of the sale”. Incremental solutions seem incomplete regarding fairness of the deduction, but still take a step toward a more effective treatment of charitable donations.
On the whole, the charitable deduction is currently designed to encourage charitable donations. Of course, it has its limitations. By making charitable giving cheaper, whether through refundable tax credits, allowing itemization with the standard deduction, or not taxing appreciated values of in-kind donations, more people will benefit and society can reap the benefits its generosity sows. Tax rate neutral credits and free itemization of the deduction at one percent of income helps to make the tax benefit a little fairer.

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