Via the New York Times’ Economix blog, Bruce Barlett offers an interesting perspective on charitable contributions and how changes in tax law could effect them:

“Although those with low incomes are not less generous than the wealthy, the bulk of them either have no federal income tax liability or use the standard deduction and therefore cannot deduct their contributions.

By contrast, the value of the charitable deduction rises with income because tax rates rise with income. For someone in the top bracket, the federal government provides a de facto subsidy of 40 percent.

As I noted last week, Congressional leaders are committed to reducing the top tax rate, maintaining the same level of revenues and the existing progressivity of the tax code. This means that deductions that largely benefit the wealthy, like the one for charitable contributions, are likely to be on the table. Not surprisingly, charitable groups have been lobbying against any curtailment of their deduction for some time.

It should be kept in mind, however, that if the top tax rate falls to 25 percent from 39.6 percent, as Representative Dave Camp of Michigan, the Republican chairman of the House Ways and Means Committee, says he hopes, this action alone will automatically reduce the value of the deduction by almost half. Instead of saving 40 cents in taxes for each dollar contributed, only 25 cents will be saved.

Scholars are divided on the charitable deduction. Writing in The New York Times, Richard Thaler of the University of Chicago has said it needs to be rethought. He notes the unfairness of giving a large tax reward to the wealthy while giving nothing to those with modest incomes.”

Read the entire post here.