Public Debt Reduction Fund
CRS Report for Congress
Public Debt Reduction Fund
Pamela J. Jackson
Analyst in Public Sector Economics
Government and Finance Division
Summary
Reducing the federal public debt is regarded as an important goal by many
taxpayers. The Public Debt Reduction Fund provides for the acceptance of monetary
gifts to be used for reducing the public debt by the Secretary of the Treasury and the
Administrator of General Services. Contributions may be taken as a charitable
contribution deduction by taxpayers who itemize their deductions in the year following
the contribution. Since the fund’s inception in 1961, over $65 million has been donated.
This report will be updated as developments warrant.
Current Law
A deficit is the difference between government receipts (such as taxes and other
revenues) and expenditures (often referred to as outlays). The public debt that is held by
the public is the accumulation of prior deficits. The Treasury borrows money by selling
securities to the public. For those who see federal debt reduction as a laudable goal,
current law provides a method whereby gifts may be made voluntarily to reduce the
federal debt. The law authorizes:
. . . . the U.S. Government to accept gifts of money or other property which are to be
used for the reduction of the public debt. It provides for the deposit of cash gifts, or
proceeds from the sale of other gifts, in a special account on the books of the
Treasury, and money in this account is to be utilized to retire obligations of the United
States which are a part of the public debt.
As can be seen, gifts may be in the form of money or an outstanding governmental
obligation (such as a bond). If the gift is in the form of real or personal property then the
property is sold with the proceeds from the sale used to reduce the public debt. Gifts may
be inter vivos gifts or as a testamentary bequest. Contributions donated to the Public Debt
Reduction Fund qualify as a charitable donation and can be taken as a deduction by those
who itemize their income tax deductions on tax returns the following tax year.
Congressional Research Service ˜ The Library of Congress
The total public debt outstanding results from receipts and outlays. 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 potential size of future
federal debt is reduced. To the extent that the Treasury projects an increase in outlays,
it issues Treasury securities to meet its obligations. These issuances result in an increase
in the public debt. However, if the Treasury projects an increase in tax receipts or other
revenue sources, then it may not need to issue Treasury securities. As debt shrinks
savings accrue to the government in reduced interest payments.
Brief Historical Overview
The program was introduced as “AN ACT To authorize the acceptance by the
government of gifts to be used to reduce the public debt.” Thus, Public Law 87-58,
approved June 27, 1961, provides for the Secretary of the Treasury and the Administrator
of General Services to accept gifts to be used for reducing the public debt. The law was
enacted to provide specific statutory authority for acceptance of such gifts and designed
to forestall possible questions concerning the government’s acceptance, treatment, and
allocation of gifts made to reduce the debt.
Public Promotion
In recent years, most contributors have become aware of the Public Debt Reduction
Fund through information provided with federal tax form instructions. The 2003 booklet
for 1040 forms and instructions issued by the Department of the Treasury, Internal
Revenue Service, included an invitation to help reduce America’s debt. That invitation
allowed taxpayers to enclose a separate check made payable to the Bureau of Public Debt
when they filed their tax return.
Alternatively, if you have already filed your income tax return and wish to make a
voluntary contribution to reduce the public debt, the check should be made payable to the
Bureau of Public Debt with the notation of “Gift to reduce the Debt Held by the Public”
written on the memo line. The donation should be sent to the following mailing address:
Bureau of the Public Debt
Attn: Department G
Post Office Box 2188
Parkersburg, West Virginia 26106-2188
Revenues
Amounts contributed to the Public Debt Reduction Fund have varied widely over the
years, but they have always been modest compared to the size of the federal budget
deficit. During the last 20 years, less than a million dollars was contributed in three fiscal
years. A single gift of more than $12 million was made in fiscal year 1994. This is the
largest single gift ever made to the fund since inception of the fund in 1961. For the 1994
fiscal year over $20 million was given for deficit reduction — the highest amount in any
fiscal year. In the most recent complete fiscal year (2003), a total of $1,277,423.40 was
given. Since 1961 more than $65 million has been donated. Table 1 shows actual
contributions made for each fiscal year.
Table 1. Gifts to the U.S. for Reduction of the Public Debt
Fiscal YearActual Donated Amount in Dollars
1961 & 196210,003.31
196310,210.10
19643,296.03
1965709,777.35
196682,606.19
1967103,995.61
196898,321.47
1969132,327.42
1970165,351.77
1971177,485.84
1972110,038.72
1973111,505.43
1974422,845.76
1975305,495.84
1976402,803.13
1977332,911.79
1978341,566.90
1979655,284.05
1980830,661.66
1981240,107.97
1982901,136.37
1983911,179.45
1984 1,548,958.70
1985 2,193,817.39
1986 1,697,365.88
1987 1,270,422.73
1988745,347.03
1989 1,549,168.04
1990 1,964,922.89
1991 1,337,064.00
1992 4,547,927.14
1993 1,843,135.75
1994 20,712,324.20
1995 7,344,457.57
1996 1,985,175.10
1997955,897.15
1998 1,535,541.02
1999 1,457,510.59
2000 1,868,891.93
2001 1,645,082.28
2002744,675.06
2003 1,277,423.40
2004664,911.25
2005 1,455,541.65
This fiscal year to date1,210,390.34
Source: Department of Treasury, Bureau of Public Debt.