The Charitable Tax Deduction – An Aid to America’s Relief Agencies

As Congress and the President take up the issue of tax reform, there is one thing we think everyone can agree on – preserving the charitable tax deduction. The charitable tax deduction was created in 1917 and has remained a popular and powerful incentive to encourage charitable giving in America for the past 100 years

But that support may be in jeopardy. While new tax reform proposals recognize the importance of the charitable tax deduction, they effectively limit the number of taxpayers who are likely to itemize, thereby reducing the number of people using the charitable deduction. This will result in a decrease in charitable giving of an estimated $13.1 billion, according to a new study conducted by the Indiana University Lilly Family School of Philanthropy.

The impact of this on the work of charities like the American Red Cross will be devastating.

When disaster strikes, the Red Cross is often the first relief agency on the ground, providing safe shelter and hot meals. While the Red Cross is not a government agency, government confers on us important responsibilities. The American Red Cross is chartered by Congress to carry out a system of national and international relief to mitigate suffering caused by disasters.

Communities across the nation depend upon the Red Cross to be an integral part of caring for their families, friends, and neighbors during disasters and other emergencies such as home fires. From collecting lifesaving donated blood for patients in need, to teaching vital health and safety courses, to supporting our men and women in uniform and the families they leave behind, we mobilize the power of volunteers and the generosity of donors to fulfill our mission.

So the Red Cross has an obligation to be there for people in times of urgent need, but with only two percent of our annual funding coming from government, we overwhelmingly rely on the generosity of the American public to fund the vital services we provide. And that is why the charitable tax deduction is so important to the work we do.

Americans are generous by nature and give often to the causes they support. But as we can see year after year, the charitable tax deduction is an incentive that encourages Americans to give more. For example, a review of Red Cross donations during the year shows an average of nearly 4,000 donations per day. That average increases to more than 10,000 per day during the holiday giving season between Thanksgiving and year end. On December 31, the last day of the year to take the charitable tax deduction, the number of donations jump to more than 100,000 in a single day. This jump can only be explained by the fact that people are taking advantage of the charitable tax deduction.

We have joined forces with other human service sector non-profits to advocate for making the charitable tax deduction universal so that all taxpayers who make a charitable gift can claim it, regardless of income or whether they itemize or not. Data from the Indiana University Lilly Family School of Philanthropy shows that this simple change would result in a net gain of $4.8 billion in increased giving each year across the charitable sector. What a tremendous impact this would have on those we serve each and every day.

Charitable giving is a critical component of our nation’s ability to serve families in times of crisis and need. We urge the President and Congress to expand, rather than reduce, the ability of taxpayers to take the charitable tax deduction and ensure that our nation’s non-profits can continue to provide for the well-being of America’s families and communities.


Gail McGovern is the president and CEO of the American Red Cross.

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