This chapter considers the deduction, for purposes of assessing taxable income, that is available in the United States for donors to ‘charitable’ organizations. It argues that the availability of this deduction has influenced the development of the charity sector, and the law and regulatory framework affecting that sector, in profound ways. For example, because ‘charity’ status in the US triggers both income tax exemptions and deductions for donors, that status is restricted in ways that seem puzzling if the justifiability of exemptions taken on their own is under scrutiny. Moreover, the coupling of ‘charity’ status and deductions in US tax law has led to the federal tax authority operating as a de facto regulator of the sector. The chapter argues that deductions distort the distribution of political power and prioritize the interests and preferences of the rich. It concludes that the solution to such inequities may lie in tax credits or targeted deductions.