Deduction Gives Little Aid to Charities, Report Says

A proposal in Congress to allow people who don’t itemize their income-tax deductions to write off up to $100 a year for charitable contributions will have little impact on giving, according to a congressional report.

The proposal is part of a broader bill aimed at helping faith-based charities qualify for federal funds. The legislation, H.R. 7, would allow people who do not itemize their taxes, estimated to be about 70 percent of all tax filers, to write off up to $25 in charitable donations in 2002 and 2003. The deduction, which is doubled for couples, would gradually increase to $100 for individuals, or $200 for couples, after 2010.

The Congressional Research Service, which conducts public-policy research for Congress, said the deduction would cost the Treasury a lot more money than charities would gain. For every dollar lost to the government, charitable giving is likely to increase by three cents or less, it said. The research service looked at the effect on giving of similar tax deductions in the past as well as the number of non-itemizers who would be unlikely to give more to charity because they already give at least $100. The provision would cost the government about $13.3-billion over 10 years, the research service said.

However, another provision in the bill that would expand a tax break for food donations by businesses probably would encourage giving, the research service said. Food businesses that now qualify for the tax break made an average of 28 percent of their charitable contributions in food or other in-kind gifts in 1999.

The House passed the bill in July. The measure awaits action in the Senate.