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We all know the charitable deduction works. It encourages Americans to give more money away than they might otherwise give. If it didn’t, we wouldn’t have it, or many other tax incentives for that matter.
Deductions and taxes are used, at all levels of government, to encourage behavior we want more of in society and discourage behavior we want less of. We have the mortgage interest deduction to encourage homeownership, and we have sin taxes to discourage consumption of substances deemed harmful, like alcohol or tobacco.
Charities feared that the 2017 tax law would lead to a drop in charitable giving by individuals. The chief reason: the doubling of the standard deduction would mean it wouldn’t pay for many to itemize on their 2018 tax returns, and without a charitable contribution deduction, they’d be less inclined to give.
With close to 100,000 active foundations and collective annual giving of nearly $87 billion, America has the largest philanthropic sector in the world.
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