Our philanthropy philosophy at TASC is now as it has always been: if more individuals increase giving—even by small amounts—a significant difference can be realized in our communities. Yet the current charitable income tax deduction falls far short of the ideal, and the number of individuals contributing to charities has steadily decreased over the past 35 years. Have Americans become less generous during the past half-century? Have we made it more difficult for Americans to support charities? Can we pinpoint impediments to individual giving? If so, what can we do to get these barriers out of the way?
TASC, with The Greater Give, is proposing a solution to make it easier and less expensive for Americans to support the charities of their choice. By streamlining the gifting process, our plan spurs employees and employers alike to “lean-in.” It simplifies record-keeping, because it uses an existing architecture (i.e. pre-tax payroll deductions for accounts such as dependent-care, transit/parking, etc.). Employers can be confident of their compliance, and more middle-class Americans can become everyday philanthropists.
So what are we talking about? We are proposing the creation of the Flexible Giving Account (FGA), an employee fringe benefit account that’s funded with pre-tax payroll deductions and managed by the gifting employees, who direct grants from their accounts to the charities of their choice. You might ask, “Aren’t charitable donations already tax-deductible?” The answer is “no” and “yes,” because these contributions are deductible only for some taxpayers: those who itemize their deductions. According to a study by the Tax Foundation,* of returns with an Adjusted Gross Income (AGI) below $50,000, fewer than 20 percent itemized. Relegating the deduction to such a small segment of our population—to those who itemize only—is no favor to would-be givers or charities across our nation.
It’s important to clarify that establishing this pre-tax deduction is not intended to change charitable giving’s current tax status. In fact, this change will complement the current system by adding a pre-tax deduction as a new way to realize the tax advantages of charitable giving. (Similar to Section 129 creating the Dependent Care Flexible Spending Account to complement the Dependent Care Tax Credit.)
So you’re thinking, “Hey that sounds great! What now?” The answer is simple yet challenging at the same time. It involves legislative change. To implement creation of an FGA, Congress must amend the regulations governing fringe benefit plans. But the actual change is relatively straightforward. Congress simply needs to add a Flexible Giving Account to the existing list of qualified fringe benefits. That’s it! Easy, right? Then again, considering the current situation in Washington, it seems nothing is easy these days…
Who does this affect? Employees. Employers. Non-profits. Communities. I can think of very few who wouldn’t be impacted by providing charitable tax incentives to significant numbers of non-itemizing taxpayers. And because many non-itemizers have relatively lower incomes and hence pay less tax, donations—subsidized by tax rules—will have tax costs below the revenue loss from taxpayers in higher brackets.
Obviously, the largest impact of the Greater Give would be appreciated by our nation’s charities. With a more predictable income stream, they’ll be able to plan better and do more. Boosting individual giving—at any amount—will foster positive change for people, companies, and society.
So you see, there are no losers in the Greater Give, only winners.
*Source: (Tax Foundation – Most Americans Don’t Itemize on Their Tax Returns – July 23, 2007)
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