Religious Charities Lobby for Continued Charitable Contributions Deduction

The Chronicle ofPhilanthropy reports that a newly formed coalition of religious charities recentlywent to Washington to persuade U.S. Senators not to eliminate the charitable contributions deduction in the midst of proposing significant federal income tax reforms.  The sense of urgency arises from a deadline imposedby Senators Max Baucus (Chairman, Senate Finance Committee) and Orrin Hatch(Ranking Member, Senate Finance Committee), who recently informed otherlawmakers that the tax expenditures that will survive their efforts to reformthe Internal Revenue Code must demonstrably “(1) help grow the economy, (2)make the tax code fairer, or (3) effectively promote other important policyobjectives.”  The recently formed Faithand Giving Coalition made the case to lawmakers that the charitable contributionsdeduction meets that three-pronged standard. The gist of their case, says the story, is that “charities save the government money by providing social services.”

While manyreligious charities indeed provide valuable social services, I believe thebroader religious community should think twice before making its case toCongress for the continuation of the charitable contributions deductionprimarily on the grounds that religious entities provide social services thatsave the government money.  The primaryfunction of most religious charities is not to undertake activities that thestate would provide in the absence of the religious entities.  Indeed, their primary function is quite theopposite – to provide something that the state cannot provide because of theEstablishment Clause.  It does notfollow, however, that either the charitable contributions deduction or federalincome tax exemption is inappropriate because most religious charities do whatthe state cannot do.  As I have writtenelsewhere, there are fairly strong arguments that federal income tax exemptionis appropriate for charities, and a plausible (though less compelling) case forthe charitable contributions deduction, apart from a desire to “subsidize”charitable donees through the tax system. This observation does not mean that government should ignore the generalsocial services provided by charities, including religious ones.  But it does imply that other policy factors arealso relevant in determining how the charitable contributions deduction shouldfare in tax reform.    

JRB