Fund for “Gifts to the United States for
Reduction of the Public Debt”: Current Law
and Proposed Legislation
James M. Bickley
Specialist in Public Finance
November 16, 2011
Congressional Research Service
7-5700
www.crs.gov
R42088
CRS Report for Congress
Pr
epared for Members and Committees of Congress
“Gifts to the United States for Reduction of the Public Debt”
Introduction
The reduction of the federal public debt is regarded as an important goal by many taxpayers. The
Congressional Budget Office (CBO) presents the long-term budget outlook under two scenarios.1
First, the
extended-baseline scenario adheres closely to current law and assumes that “many
adjustments that law-makers have routinely made in the past—such as changes to the AMT
[alternative minimum tax] and to the Medicare program’s payments to physicians—will be made
again.”2 Under this extended-baseline scenario, federal debt held by the public would rise from
69% of GDP (gross domestic product) in FY2011 to 84% of GDP in FY2035.3 Second, the
“
alternative fiscal scenario embodies several changes to current law that would continue certain
tax and spending policies that people have grown accustomed to.”4 Under this scenario, federal
debt held by the public would rise from 69% of GDP in FY2011, to more than 100% of GDP in
FY2021, and nearly 190% of GDP in FY2035.5
Under current law, an individual may make a contribution to reduce the national debt either
online or by check payable to the Bureau of the Public Debt.6 Contributions may be taken as a
charitable contribution deduction by taxpayers who itemize. These contributions are deposited in
a Treasury fund titled “Gifts to the United States for Reduction of the Public Debt,” subsequently
referred to in this report as the “Public Debt Reduction Fund.”7
Four bills have been introduced in the 112th Congress to add another method of making a
contribution to reduce the national debt. These bills would permit taxpayers to designate a
donation on their tax returns or their Form W-4. An employee completes Form W-4 in order for
the employer to withhold the correct federal income tax form the employee’s pay.
In order to evaluate these bills, this report describes current law for the Public Debt Reduction
Fund and discusses proposed legislation. The amounts of contributions by fiscal year to the
Public Debt Reduction Fund are listed in an
Appendix.
Current Law for Public Debt Reduction Fund
On June 27, 1961, H.R. 311,
An Act to authorize the acceptance by Government of gifts to be
used to reduce the public debt, was signed as P.L. 87-58. This law included the following
excerpts.
The Secretary of the Treasury is authorized to accept on behalf of the United States (1) any
gift of money made on the sole condition that it be used to reduce the public debt of the
1 Congressional Budget Office,
CBO’s 2011 Long-Term Budget Outlook, June 2011, 94 p. For comprehensive
explanations of these scenarios, the reader is referred to this CBO report.
2 Ibid., p. 2.
3 Ibid., p. x.
4 Ibid., p. 2.
5 Ibid., p. 7.
6 Some of the material in this report is from CRS Report RS20092,
Public Debt Reduction Fund, by Pamela J. Jackson.
7 For information about the national debt, see CRS Report R41815,
Overview of the Federal Debt, by D. Andrew
Austin.
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“Gifts to the United States for Reduction of the Public Debt”
United States, (2) any gift of obligations of the United States, if made on the sole condition
that the obligations be canceled and retired and not reissued, or (3) any gift of other
intangible personal property made on the sole condition that it be sold, and the proceeds
realized from the sale be used to reduce the public debt of the United States.
The Administrator of General Services is authorized to accept on behalf of the United States
any gift of other property, real or personal, made to the United States on the sole condition
that it be sold and the proceeds realized from the sale be used to reduce the public debt of the
United States....
If under applicable law any gift accepted under the first section of this Act is subject to a gift
or inheritance tax, the Secretary of the Treasury or the Administrator of General Services, as
the case may be, is authorized to pay such tax out of the proceeds of such gift, or the
proceeds of the redemption or sale of such gift, as the case may be.
There is hereby established on the books of the Treasury a special account into which shall
be deposited all money received as gifts under this Act and all money received as a result of
the conversion into money of gifts of property other than money received under this Act. The
Secretary of the Treasury shall from time to time utilize the money in the special account for
the payment at maturity or the redemption or purchase before maturity of any obligations of
the United States included in the public debt of the United States.8
Contributions donated to the Public Debt Reduction Fund qualify as charitable donations and can
be taken as deductions by those who itemize.
Each calendar quarter, amounts that have been donated to the Public Debt Reduction Fund are
transferred to the Public Debt Redemption Account. Thus, the federal government borrows less
than it would have absent the donations and the size of the federal debt is reduced.
Contributions to the Public Debt Reduction Fund since FY1996 are listed in the
Appendix. For
FY2011, contributions totaled $3,277,369.23.9 For the two prior fiscal years, the amounts of
contributions were $2,840,466.75 (FY2010) and $3,063,057.05 (FY2009).10 In each of the last
three fiscal years, contributions were higher than in any of the prior 13 fiscal years, but arguably
the amounts were low in relationship to the size of the national debt.
Proposed Legislation in the 112th Congress
In the 112th Congress, four bills have been introduced to add a new method to allow contributions
to the Public Debt Reduction Fund.
Current Contribution Methods
There are two methods of contributing to the Public Debt Reduction Fund. The first method is
indicated in IRS instructions for Form 1040 and the Treasury website called treasurydirect.gov.
8 This law is now included in 31 U.S.C. 3113.
9 U.S. Treasury, TreasuryDirect, “Gift Contributions to Reduce Debt Held by the Public,” p. 1.
10 Ibid.
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“Gifts to the United States for Reduction of the Public Debt”
For 2010, the Instructions for Form 1040 stated the following:
How Do You Make a Gift To Reduce Debt Held By the Public? If you wish to do so,
make a check payable to “Bureau of the Public Debt.” You can send it to: Bureau of the
Public Debt, Department G, P.O. Box 2188, Parkersburg, WV 26106-2188. Or you can
enclose the check with your income tax return when you file.11
The second method is specified on the treasurydirect.gov site under the topic “Frequently Asked
Questions about the Public Debt.”12 This site states that “You can make a contribution online
either by credit card, checking or savings account at Pay.gov.”13 Clicking on Pay.gov brings up a
donor information form that allows the individual to make an online donation.
Bills with Designation of Contribution
In the 112th Congress, four bills have been introduced with a new method of contributing to the
Public Debt Reduction Fund: designating a contribution on a tax return or Form W-4.
Representative Steve Stivers introduced H.R. 2214,
Debt Elimination by Tax-Deductible
Contribution Act of 2011, which would amend “the Internal Revenue Code to allow taxpayers to
designate a specified portion (not less than $1) of their income tax liability for deposit in the
general fund of the Treasury to reduce the public debt.” The designation of the donation “shall be
made either on the first page of the return or on the page bearing the taxpayer’s signature.” This
bill did not propose that a box be included on the tax form. This bill had 103 cosponsors.
Representative Eric A. Crawford introduced H.R. 2411,
Reduce America’s Debt Now Act of 2011,
which has 12 cosponsors. This bill would allow “for an employee election on Form W-4 to have
amounts deducted and withheld from wages to be used to reduce the public debt.” Unlike the
other three proposed bills, donations would “not be deductible as charitable contributions for
federal income tax purposes.”
In August 2011, Warren Buffett published an op-ed in the
New York Times in which he argued that
the “rich” pay too low of marginal tax rates on income, and stated that he would like to “raise
rates immediately on taxable income in excess of $1 million, including, of course, dividends and
capital gains.”14 Subsequently, the Obama Administration released a new economic plan titled
Living Within Our Means and Investing in the Future.15 One of the plan’s five principles for tax
reform states the following:
Observe the Buffett Rule. No household making over $1 million annually should pay a
smaller share of its income in taxes than middle-class families pay. As Warren Buffett has
pointed out, his effective tax rate is lower than his secretary’s. No household making over $1
million annually should pay a smaller share of its income in taxes than middle-class families
11 Internal Revenue Service,
Instruction for Form 1040 for 2010, 2011, p. 88.
12 U.S. Treasury, TreasuryDirect, “Frequently Asked Questions about the Public Debt,” p. 2. Available at
http://www.treasurydirect.gov/govt/resources/faq/faq_publicdebt.htm, visited October 31, 2011.
13 Ibid.
14 Warren E. Buffett, “Stop Coddling the Super-Rich,” op-ed,
New York Times, August 14, 2011, p. A19.
15 Office of Management and Budget,
Living Within Our Means and Investing in the Future, September 2011, 67 pp.
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“Gifts to the United States for Reduction of the Public Debt”
pay. This rule will be achieved as part of an overall reform that increases the progressivity of
the tax code.16
Senator Harry Reid introduced the
American Jobs Act of 2011, S. 1660, which contained a 5.6%
surtax on millionaires to pay for the provisions of the jobs bill.17
In October 2011, Republicans in the House and Senate offered their alternative to the “Buffett
Rule:” donations via individual income tax forms to reduce the debt.18 Two companion bills, S.
1676 and H.R. 3099 (
Buffett Rule Act of 2011), were introduced and stated that the designation of
the donation “shall be either on the first page of the return or on the page bearing the taxpayer’s
signature” and “shall be by a box added to the return.” H.R. 3099 was introduced by
Representative Steve Scalise and has 18 cosponsors. S. 1676 was introduced by Senator John
Thune and has 36 cosponsors.
Senator John Thune issued a press release that stated,
This bill would make it easier for those wealthy individuals who feel they are currently
under-taxed to pay more to the U.S. Treasury above and beyond their current obligations,
without raising taxes on America’s job creators.19
Analysis of Proposed Legislation
As previously indicated, all four bills would permit taxpayers to designate a contribution on their
tax returns or Form W-4, and the designation option for a contribution to be printed on the tax
return or Form W-4. In addition, two bills, S. 1676 and H.R. 3099, would require that a box be
added to the tax return.
These proposed bills would make the taxpayers more aware of their opportunity to make a
contribution to reduce the national debt and permit the taxpayer to design a contribution on their
tax returns. Arguably, each of these bills would increase taxpayers’ donations, but the amount of
the increase is unknown.
In the past, the Department of the Treasury has resisted the addition of non-tax-related items to
tax forms. This opposition is based upon the Treasury’s judgment that additional requested
information makes the tax forms appear more difficult. A long-term goal of the Treasury has been
to make tax forms easier to understand and fill out. Over the years, the Treasury has successfully
opposed the addition of checkoff boxes to tax forms. Currently, the only checkoff box is for the
“Presidential Election Campaign Checkoff Fund.”
16 Ibid., p. 46.
17 For an analysis of the “Buffett Rule,” see CRS Report R42043,
An Analysis of the “Buffett Rule”, by Thomas L.
Hungerford.
18 “GOP Offers Its Own ‘Buffett Rule’: Box on Tax Forms for Donations from Wealthy,”
Daily Tax Report, October
13, 2011, p. G10.
19 Office of Senator John Thune, Press Release on “The Buffett Rule Act of 2011,” October 12, 2011, p. 1.
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“Gifts to the United States for Reduction of the Public Debt”
Appendix. Gift Contributions to Reduce the
National Debt
Table A-1. Gift Contributions to Reduce the National Debt
Fiscal Year
Amount Contributed
2011 $3,277,369.23
2010 $2,840,466.75
2009 $3,063,057.05
2008 $2,189,358.89
2007 $2,624,862.42
2006 $1,646,209.41
2005 $1,455,541.65
2004
$ 664,911.25
2003 $1,277,423.40
2002
$ 744,675.06
2001 $1,645,082.28
2000 $1,868,891.93
1999 $1,457,510.59
1998 $1,535,541.02
1997
$ 955,897.15
1996 $1,985,175.10
Source: U.S. Treasury, TreasuryDirect, “Gift Contributions to Reduce Debt Held By the Public,” p. 1.
Author Contact Information
James M. Bickley
Specialist in Public Finance
jbickley@crs.loc.gov, 7-7794
Congressional Research Service
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