Many proponents of a flat income tax call for retaining the deduction for charitable contributions, but there are substantial reasons to eliminate the deduction as part of any flat tax proposal. Contrary to popular opinion, the data suggest that giving to charities probably would increase. A flat tax would increase economic growth, personal income, savings and net wealth, all of which lead to higher levels of giving.

• Even though the top marginal income tax rate has ranged from 28 to 91 percent over the past two decades, charitable contributions have remained relatively constant, at about 1.83 percent of personal income.

• Because the percentage of income donated to charities historically has been so constant, an increase in economic growth resulting from a flat tax would mean contributing the same percentage would result in a greater amount of money.

• An analysis concludes that the amount of money donated to charities each year under a flat tax system would be about 3.8 percent more than would have been donated under the current system.

• Several factors other than tax treatment determine how much individuals donate; about 64 percent of donors do not claim a tax deduction for their contributions.

Before both the tax rate cuts of 1981 and the 1986 tax reform, analysts predicted a significant decrease in charitable donations. However, contributions instead increased both times.

Source: John S. Barry, "How a Flat Tax Would Affect Charitable Contributions," Backgrounder No. 1093, December 16, 1996, Heritage Foundation, 214 Massachusetts Avenue, NE, Washington, DC 20002, (202) 546-4400.