Top senators lobby for charitable deduction

Two senior tax writers are lobbying to ensure that the charitable deduction remains intact in any tax overhaul.

Sens. John Thune (R-S.D.) and Ron Wyden (D-Ore.) say in a new letter that deduction's full value should be kept, to reiterate the government's "long-standing dedication to encouraging private acts of charity and compassion."

"The charitable deduction is unique. It is the only provision that encourages taxpayers to give away a portion of their income for the benefit of others," Thune and Wyden wrote to Senate Finance Committee Chairman Max Baucus (D-Mont.) and the panel's ranking member, Sen. Orrin Hatch (R-Utah). 

"For this reason, it is not a loophole, but a lifeline for millions of Americans in need."

Wyden is in line to take over for Baucus, who is scheduled to retire at the end of 2014, as the top Democrat on the powerful Finance panel. Thune is currently a member of Senate GOP leadership.

Charitable groups have long made a similar argument for leaving the deduction alone in tax reform or deficit reduction efforts. Scrapping the tax break, those groups say, would put a dent in their services, putting more strain on state and local governments that would be forced to make up the difference.

President Obama has long called for capping itemized deductions at 28 percent, instead of the top individual rate, currently 39.6 percent. 

The senators' letter also underscores the challenges of tax reform, namely that many of the most expensive tax breaks are both popular and have big-name defenders. The Congressional Budget Office has estimated that the charitable deduction will cost $568 billion over a decade.