Flat Taxes and Charitable Contributions

Do you think a 5% flat tax in Utah will result in fewer charitable contributions? Should we oppose a flat tax, so that our church still gets its charitable receipts? I think we should trust that people will still be charitable. I support the currently proposed 5% flat tax.

The Utah Legislature is currently considering a bill which if passed, it is estimated, will incent 80% of Utah taxpayers to choose a 5% flat tax rate. Some legislators, particularly those of the LDS faith, are worried that a flat tax might discourage charitable giving. I hope not. But I could see how a poorly crafted flat tax would have just that effect.

The Deseret News says of the LDS church's position on a flat tax:

LDS Church leaders have said that whatever personal income tax changes are made, there should still be incentives for charitable giving.

In September of 2005, a legal representative for the LDS church read a statement in front of a legislative committee. It said in part:

"Our community is best served by providing tax incentives for the support of charitable activities," said Jon Butler, a lawyer who read the church statement. "Charitable contributions help provide for society's poor and needy, fund education and the arts, and meet other important social needs beyond the reach of government resources."

At the time (and probably currently) the average tax rate for Utahns was 7%. People have interpreted that statement, apparently, to mean that the LDS church does not prefer a flat tax. I don't hold that interpretation. I think the LDS church would prefer not to have a flat tax rate that is so high that it would bite into the average family's ability to provide charitable contributions. I agree with the statement that "charitable contributions help provide for...important social needs...". The incentives that government should provide for charitable giving are, in my opinion, those where government doesn't take all our money for us and try to provide governmental remedies in the place of those that should be charitable.

In that light, I support the current tax proposal found in Senate Bill 223. It will make the tax burden on most Utah families much less complex and confusing. It will also leave room for charitable giving. I trust that most Utahns' current reason for charitable giving is NOT that they are trying to find a tax break. I therefore trust that charitable giving in Utah will still be robust (and likely even more than now) under a flat tax.


  1. I look at it this way. If I am getting taxed less. I have more money to give. I thinks its a great idea.

  2. The Governor/Senate proposal includes an optional 6% credit for itemized deductions, including charitable deductions. The credit as well as the standard household and per person credits are phased out at 1.5 cents per dollar of AGI, starting at AGI of $28,000 for a married couple.

    [Note: this is the current proposal. This is subject to change.]

  3. I like giving taxpayers the option of electing the flat tax or the traditional method. Then people can see for themselves the bottom line. If the bottom line isn't much different, or is even better under the flat tax, people will have at least as much left in their pocket as under the traditional system.

    The question, then, is whether people will sustain or increase their charitable giving in the absence of a government tax deduction; something that for many people would amount to nothing more than the false facade of an incentive anyway?

    I see this on two levels. On the spritual level, I have to say that if a tax deduction turns out to be the ultimate decider between giving or not, the gift currently being given is as if it had been retained anyway. There is no virtue in that type of giving.

    On the earthly level it would be problematic if donation levels decreased. If you are right, contributions will not decrease. But even if they do, perhaps it will be because people are being more honest with themselves.

  4. I guess I didn't read closely the bill, but if taxpayers can make the choice which tax option to use, that makes it even better. I like the point that you make as regards the spiritual perspective.


Post a Comment

Thank you for commenting. If you have a Google/Blogger account, to be apprised of ongoing comment activity on this article, please click the "Subscribe" link below.

Popular posts from this blog