We have sin taxes to discourage tobacco and alcohol use. We have laws to reduce illicit behavior. We have speeding tickets to prevent unsafe driving. Yet, I never imagined our government would attempt to diminish or deter charitable giving. But recent actions in Washington and within our court system show that our charities are on the brink. Without leadership or public outcry there will continue to be slow creep at existing law and legal precedent. At present, this erosion of our legal and social contracts has manifested itself in two ways.
The first relates to the time-honored charitable giving deduction. Throughout various fiscal negotiations on tax reform and sequestration, policymakers have proposed capping or eliminating this deduction. Charities are rightly concerned. Changing the charitable giving deduction would adversely affect the level of donations, and ultimately constrain resources and reduce the services charities can provide the public. Each year, nearly 40 million Americans claim the charitable tax deduction which is inspiring because it means individuals and families are actively choosing to pay it forward.
The second deals with calculating the tax liability for a gift. This issue has received even less attention than the charitable giving deduction, but is equally important, because if left unaddressed it too would negatively impact the lives of those that receive support from charities. The crux of the matter is two cases recently ruled on by the Southern District Court, U.S. (IRS) vs. MacIntyre et al and U.S. (IRS) vs. Hilliard et al.
Despite the fact that the tax code explicitly states there is a cap on interest that cannot exceed the value of the gift, the court bucked legal precedent and ruled in favor of the legal interpretation presented by the IRS. This attempt by the IRS to alter existing tax law through litigation is dangerous. It represents an obvious attempt to generate new and unauthorized revenue streams. Furthermore, if heavy tax bills are levied and collected, there will be an immediate and damaging impact on many charitable organizations.
The economic reality is that many of our most beloved charities are struggling to raise money, but the problems they are trying to address such as hunger, homelessness, natural or community disasters are on the rise. In the days, weeks and months ahead we must all ask ourselves a fundamental question, why would we want to shrink funding for organizations like the United Way, Salvation Army, the Red Cross or our local food banks? Each year organizations such as these provide so much societal good and care for millions of people in need.
All three branches of our government are responsible for this alarming shift on charitable giving. Changing our policies or misinterpreting existing law regarding gifts is more than bad policy -- it is an affront to the fundamental belief that we are our brothers and sisters' keeper. Giving and caring for the least of these through charitable organizations has a long and proud history in our country, and it should continue to be encouraged by our elected officials and government agencies. For generations, poverty-based, educational, medical and religious charity organizations in the U.S. have helped feed, clothe and treat the needy in our society. We need volunteers and well-funded charities to help improve our neighborhoods, communities and cities and I believe we are a better society when our government encourages acts of generosity.