Charity Tax Credits:
Federal Policy and Three Leading States
Margy Waller
Presented at The Pew Forum on Religion & Public Life
May, 2001
EMBARGOED UNTIL 10A.M. ON WEDNESDAY, MAY 9, 2001
This report was prepared with the generous support of
The Annie E. Casey Foundation.
Charity Tax Credits:
Federal Policy and Three Leading States
Executive Summary
Margy Waller
President George W. Bush proposes to expand charitable giving with state
charity tax credits for donations to poverty-fighting programs by permitting states to pay
for the cost of the credit (in lost revenue from taxes) with the state welfare block grant
(Temporary Assistance to Needy Families). “States would be encouraged to provide a
credit (of up to 50 percent of the first $500 for individuals and $1,000 for married
couples and corporations) against state income or other taxes for contributions to
charities addressing poverty and its impact. States would be given the flexibility to offset
the costs of a charitable state tax credit by using money from the Temporary Assistance
to Needy Families (TANF) program.”1 This paper considers whether such a policy
would benefit low-income families, the communities where they live, and charities
serving those families, by reviewing the history of charity tax credit proposals, surveying
three leading states that have implemented the credits, and considering key questions.
Earlier proposals for tax credits were packaged as part of the devolution
revolution and welfare reform; current proposals are promoted as a way to increase
support for faith-based and other community organizations or to alleviate poverty.
However, all of these proposals share the common goal of shifting decision-making
about how and where public resources are used to meet the needs of poor families from
elected and appointed officials to individual taxpayers. Consistently, supporters promote
the credits as a way to let taxpayers take control of allocating tax dollars to meet social
welf