Center on Budget and Policy Priorities:  “Pease” Provision in Fiscal Cliff Deal Doesn’t Discourage Charitable Giving and Leaves Room for More Tax Expenditure Reform:

The recent “fiscal cliff” deal reinstated a limit on itemized
deductions for high-income taxpayers known as the “Pease” provision, which policymakers created as part of the 1990 bipartisan
deficit-reduction package but which the Bush tax cuts phased out
between 2006 and 2010.  In recent days, some pundits and leaders of some
charitable organizations have suggested that because Pease limits the total amount of itemized deductions that
high-income filers can claim, it will reduce the incentive for
taxpayers to donate to charity.  That suggestion is incorrect,
however, as a close look at Pease makes clear.

As an important
new paper from the Urban Institute and Tax Policy Center shows,
the fiscal cliff law’s tax provisions will increase charitable
giving, not reduce it.  The analysis — whose authors include C. Eugene
Steuerle, a leading expert on these issues — estimates that the new law
will boost charitable giving by $3.3 billion a year, or 1.3%,
compared to what it would have been if policymakers had extended the
tax laws that were in place in 2012.  The increase results mainly from
the rise in the top marginal income tax rate to 39.6%, which
raisesthe value of the charitable deduction.

The Urban Institute-TPC analysis also explains that “the Pease limitation has negligible effects on
the tax incentive for charitable giving” (emphasis added).  It shows
that for people in the top income tax bracket, the tax benefit of
making charitable donations will rise from 35 cents in less tax
liability for each additional dollar in charitable giving to 39.6 cents
per dollar — an increase in the tax incentive that Pease does not affect.