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1 1 (June 2018)

handle is hein.amenin/aeiaafk0001 and id is 1 raw text is: Charitable Giving and the Tax Cuts and jobs Act By Alex Brill and Derrick Choe June 2018 This paper investigates how the Tax Cuts and Jobs Act affects household charitable giving in the United States. We find that the law will reduce charitable giving by $17.2 billion (4.0 percent) in 2018 according to a static model and $16.3 billion assuming a modest boost to growth. Four-fifths of this decline is driven by an increase in the number of taxpayers who claim the standard deduction. We also investigate two policy options that could boost total giving above previous levels: an above-the-line deduction and a tax credit. For over a century, the US tax code has incentivized charitable giving by allowing individual taxpayers who chose to itemize to deduct their charitable gifts. With the enactment of the Tax Cuts and Jobs Act (TCJA) in 2017, the aggregate federal tax incentive for charitable giving has been reduced. While the TCJA imposes no explicit limitation on the deduction for charitable giving set forth in Section 170 of the Internal Revenue Code, the increase in the standard deduction, coupled with limitations on key itemized deductions, will significantly reduce the number of taxpayers who itemize and are therefore eligible for a tax break for their donations. Additionally, reductions to individual income tax rates will moderately increase the after-tax price of giving for many of those who continue to itemize. We estimate that the TCJA will reduce individual charitable giving by almost 4.0 percent, or $17.2 billion on a static basis and $16.3 billion on a dynamic basis. We explore two policy reforms that could reinvigorate individual giving: (i) extending the charitable deduction to non-itemizers and (2) replacing the deduction with a flat-rate credit for charitable contributions. Charitable Giving and the Tax Code The deduction for charitable contributions was first added to the tax code as part of the War Revenue Act of 1917. Donations were deductible up to a ceiling of 15 percent of taxable net income. In 1944, Congress liberalized the deduction by changing the ceiling to 15 percent of adjusted gross income (AGI), a broader measure than taxable net income. The limit was increased to 20 percent of AGI in 1952 and to 30 percent of AGI in 1954. In 1964, Congress expanded the charitable giving provision by broadening the types of organizations that can receive tax-deductible donations and, under certain circumstances, by permitting an unlimited deduction. In 1969 and again in 1976 and 1978, Congress shifted course, tightening the rules and imposing new limitations on the charitable deduction. A significant expansion, albeit temporary, occurred in 1981 when Congress extended the charitable deduction to non-itemizers. Non-itemizers were allowed to deduct a small amount of contributions in 1982 through 1984, half of all contributions in 1985, and all contributions in 1986. Because Congress

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