Opinion: Tax Overhaul Means Rethinking Charity Break

Eliminating the current system of deductions for charitable donations should be central to any broad overhaul of the tax code, a University of Chicago economics professor argues in a New York Times column.

Richard H. Thaler of the university’s Booth School of Business says that increasing federal revenue to cut the deficit without raising income-tax rates means minimizing the number of deductions and other breaks.

Mr. Thaler suggests replacing the current system of deductions that grow larger with the donor’s income with a flat-rate subsidy for giving that takes the form of tax credit rather than a subtraction from income.

“If we think that high marginal tax rates are bad because they distort incentives, the same is then true for tax subsidies,” he writes. “If people want to give money to a worthy organization, applaud them. But let them do it on their own dime.”

Read more about the changes to the charitable deduction now under consideration in the cover article from the latest issue of The Chronicle of Philanthropy.