How a Flat Tax Would Affect Charitable Contributions

Publication Date: September 2002

Publisher: Heritage Foundation (Washington, D.C.)

Author(s): John S. Barry

Research Area: Banking and finance

Keywords: Taxes

Type: Report

Abstract:

With talk of overhauling the federal income tax in favor of a simple, consumption based flat tax also has come talk of eliminating the charitable contribution deduction. This has raised considerable controversy. Many proponents of a flat income tax call for retaining the charitable deduction, but there are substantial reasons to eliminate the charitable deduction as part of any flat tax proposal. Contrary to popular opinion, the data suggest that giving to charities probably would increase with passage of a flat tax with no charitable deduction. The reason: The flat tax increases economic growth, personal income,savings, and net wealth, all of which lead to higher levels of giving.