Three-fourths of Americans favor charitable tax deduction

Survey indicates any changes to system would face strong opposition

February 7, 2012

With the release of the 2013 Federal budget, the Obama administration has once again called for the capping of the charitable tax deduction for high net-worth households, taking it out of step with what the American public wants, according to a study (PDF download) conducted by Wilson Perkins Allen Opinion Research on behalf of Dunham+Company.

Americans have made it clear that they value the deduction as it currently stands as more than three-quarters (78 percent) indicated that they agree with the following statement:

“Tax deductions to charities should not be cut, capped, or limited because charitable tax deductions encourage people to give their money to help others without getting anything tangible in return.”

President Barack Obama had indicated a shift in his policy and a willingness to preserve the charitable deduction for high net-worth households during his State of the Union address. But the 2013 Budget calls for a cap of 28 percent on the charitable tax deduction for households making $200,000 or more.

“The attitude among the American public regarding the charitable tax deduction is clear: Regardless of household income, education, age, race, or gender, Americans overwhelmingly support the current tax deduction for charitable contributions,” said Rick Dunham, President+CEO of Dunham+Company. “President Obama has once again shown he does not embrace the importance of retaining the charitable tax deduction at its current level, even though these households, representing less than 3 percent of households, provide $100 billion, over 40 percent, of all individual charitable contributions.”

Not capping, cutting, or limiting the charitable tax deduction is especially strong among women, with 82 percent agreeing with the statement, and in the key donor demographic of 55-64 years old, with 84 percent agreeing with it.

The study shows that cutting, capping, or limiting the charitable tax deduction for those who make over $200,000 per year would likely drop total donations by as much as $5 billion to $7 billion. This would spell significant trouble for nonprofits that rely heavily on support from high net-worth individuals.

The study uncovers areas of giving that could be most affected if the charitable tax deduction were to be cut, capped, or limited. For example, the impact is most significant to those 45-54 years of age, an important emerging donor demographic. This particular group shows a potential 19.1 percent decrease.

Also concerning is the potential drop in donations in the Northeast and Midwest. Donors in the Northeast indicate that they would reduce their giving 18 percent; and in the Midwest, the variance is even greater with donors saying they would reduce their giving by 25 percent.

The survey also found that most Americans (73 percent) believe that private nonprofits are better at promoting social good than the government.

“The United States has the most robust charitable sector in the world, and one of the main reasons is our unique system of tax incentives for those who give so generously,” Dunham said. “The social good the deduction generates far outweighs the money it costs. And things like education of our youth, healthcare, help for the needy, and funding for the arts can’t be measured on a balance sheet, so the Administration should do all it can to retain the charitable tax deduction as it stands for high net-worth households.”

The study was part of Wilson Perkins Allen Opinion Research’s January Omnibus Study of 1,000 adults nationwide. All respondents were contacted via Random Digit Dialing methodology. Interviews were conducted via live telephone interview Jan. 5-8, 2012. A sample of 1,000 has a margin of error of plus or minus 3.1 percent at the 95 percent confidence level.