A Charitable Proposal

Posted by Jeffrey Brown on Mar 9, 2010

Filed Under (Uncategorized)

I just ran across an idea by one of my favorite policy economists, Gene Steuerle of the Urban Institute, in a piece he wrote entitled A New April 15: Make It a Day of Giving (Efficiently).  In a nutshell, he calls for treating charitable contributions in the same manner that we treat IRA contributions – by allowing tax deductibility to extend through the April 15 tax filing deadline.  This is one of those incredibly simple ideas that ought to be implemented tomorrow. 

As background, charitable contributions typically have to be made by December 31 to qualify for deductibility from that year’s taxes.  However, December 31 comes at a time of year in which a lot of people are focused on major holidays rather than taxes.  We allow people to make deductible 2009 IRA contributions as late as April 15, 2010, thus allowing people to make their IRA contribution decision simultaneously with figuring out their 2009 taxes.  This timing is much more salient and allows people to optimize more effectively.  Why not do the same for charitable contributions?  After all, we have done so after major disasters, including the 2005 Tsunami and the 2010 Haiti disaster.  Why not allow it for all contributions every year?

Clearly, this would be a better approach than favoring certain types of deductions over others by extending deductibility on a case-by-base basis, a point made by Howard Gleckman in January recent blog post.  The basic point he makes is that, yes, Haiti needs relief.  But so do hundreds of other incredibly good causes, be it starving children in Somalia or the American Red Cross response to a localized disaster.