By doubling the standard deduction and elminating State and Local Tax (SALT) deductions from federal tax liability, the 2018 federal tax code makes it unfeasible for most people’s charitable contributions to be a tax deduction.
Therefore, I am proposing the following changes to both the Iowa and federal tax codes:
First, make federal income taxes deductible from state income tax liabilities. No dollar should be taxed twice, period.
Second, all charitable giving should be a tax credit first, tax deduction second, with the credit prorated to the efficiency of that charity. Efficiency is inversely proportional to the overhead of a given charity.
For every dollar that goes to the Red Cross, an individual gets 91 cents of tax credit and 9 cents of tax deduction.
Every dollar that goes to St. Jude’s, an individual gets 73 cents of tax credit and 27 cents of tax deduction.
If one’s church truly is a 70/30 church, then a donation to it would be 70 cents tax credit, 30 cents tax deduction.
One’s alumni association, or one’s booster club, would still be wholly a tax deduction.
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My reasoning is that any charity that is truly benefiting the poor is already receiving federal funding. The mechanism I proposed and defined above would allow individuals to circumvent the federal government’s policies and vote with their own dollars for the charities they wish to support.
Third, we need to make time donated a tax credit as well. It could be valued at the average hourly wage in Iowa, which is $16.53 an hour.