The tax deduction for charitable contributions was an early feature of the US income tax code, introduced in 1917 because of a concern that the wealthy would stop donating to higher education when hit by higher taxes for World War I.
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In total, therefore, charitable tax exemptions cost the Treasury about $130 billion, or on the cuckoo 10-year accounting used in budget calculations, some $1.8 trillion over the period 2011-2020 – which would make a decent dent even in that decade’s horrendous budget deficits. In addition, state and local tax exemptions for charities cost $30-50 billion. The charitable contribution income tax deduction is very inefficient according to a 2009 Congressional Research Service (CRS) study of the sector; thus its $54 billion cost increases charitable donations by only about $27 billion.
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Apart from charities’ adverse effect on the economy itself, there are a number of reasons why this could be a bad thing:
- The innumerable scams in charitable donations of automobiles and other property;
- The ability of Wall Street hotshots to leverage their social life through “charitable dinners” and other charitable events, a substantial portion of the costs of which are borne by much poorer taxpayers;
- The raucous propaganda and lobbying activities, almost universally in favor of bad public policy, by the charities themselves;
- The uncounted “hedonic” cost to the public as a whole of being subjected to continuous obnoxious fundraising.
Given charities’ averse effect on the economy, their own economic inefficiency, the great inefficiency of the charitable tax deduction and the disinclination of the very rich to give charitable donations to the poor, it is clear that the charitable deduction should be ended, as should the tax exemption for charities’ income, the tax exemption on their real estate and their other benefits from the public purse. Since excessive charitable activity is economically damaging, such activity should no longer be subsidized by the remainder of the economy.
“Just send us your cash.”
— George W. Bush on donations for Haiti
#15
The suggestion to eliminate the charitable deduction does not imply the elimination of the concept of a non-profit organization. A separate discussion could be had as to whether a charity should be tax-free.
#24
What you are suggesting is that everyone be taxed such that they are left with the same amount. I.e., no one can be wealthy.
#32
Why not simply make public the donations made by the upper 10%? Seems to me that shame is a better carrot to encourage charitable donations than setting up a system to be gamed by the rich.
>> dusanmal said, on January 2nd, 2011 at 8:44 pm
>> Yet another uncontrolled freedom that is in the eye of anal Progressives. Sorry control freaks, you can’t have a piece of it nor can you control to whom we voluntarily give.
You’ll need to ice down your brain after that stretch!
How about punishing the tax cheats rather than many great non-profits who are doing valuable work?
I have worked much of my adult life for non-profits and I can honestly say that I have never come across any cheating whatsoever.
Nevertheless, I support reform because, clearly, there is abuse.
Here is what I would propose:
* Public financial records
* Caps on salaries (let’s say $150,000 for the highest paid)
* Caps on administration costs (lets say 30%)
* Caps on fund raising expenses (lets say .30 per $1)
* Caps on financial investments (I’m not sure what’s reasonable.)
If the organization can’t meet these goals, they lose their tax exempt status.
Good non-profits are already beating these goals by a wide
# 37 Greg Allen said, “Caps on administration costs (lets say 30%)
* Caps on fund raising expenses (lets say .30 per $1)”
So you think it’s okay for sixty cents of every dollar donated should never visit the people in need? You must have been working for CARE, or The Red Cross.
60% overhead would be a stretch goal for so many “name” organizations.
Take “The March of Dimes” fer instance. There is a National MoD with its Exec D’or making $800K per year “because they have to be able to relate to their peers in industry” and local MoD where the Exec D’or makes 80K per year, his wife the VP D’or makes 50K per year and 2-3 other long term folks taking the balance of funds that are for individually determined needs of the local community–ie: zip.
And they follow/meet/comply with all the rules. Think of the Kiddies.
Its hard for flesh and blood to stand too close to green money and not grow a fungus. You need REAL enforcement so that people want to do it but refrain because they know they will be caught: not like right now where they all know there is nothing to be caught about.
So, I would vote against charitable deductions but am willing to go with the Majority vote on such issues==aka–as long as a social safety net is in place ((MAKING MOST CHARITIES UNNEEDED!)) I don’t care if others choose to expose their violins in public.
Silly Hoomans–getting cheated in so many ways and calling it a virtue.
Yea, veerily.
#13 ECA quoted expenses for what he considers the poverty line. His numbers are ridicules. I make a little less than what he said, but you know what? I have plenty of money. I don’t waste it on having both a home phone and a cell phone. I have one or the other. I don’t spend money on cable TV. I have a little TV and an antenna, not a wide screen.
He listed a lot of things that aren’t necessary. TV is not necessary. Rent is not 10,000 a year. I have 720 square feet for $250 a month. I live within my means so I don’t consider myself poor.
The only real charity comes from the government. I engage in lots of charity by voting for Democrats who will spend other peoples money on programs for the poor.
Yes, there are many scams and poorly run charities out there. But let’s not throw out the baby with the bathwater.
The simple fix is that all charities be recognized by the IRS. Each charity would submit a full financial accounting to the IRS each year in order to qualify as a tax deductible charity. A set minimum (80%?) must be used for the aims of the charity as well as publicizing that amount.
If the charity doesn’t want to be tax deductible, such as the tea baggers, then they don’t have to. And don’t exempt religions.
#41 – I sure hope that was sarcasm. I don’t trust beaurocrats any more than I do the clergy or “volunteers” who make more than I do.
“Faith Based” organizations, do in fact spend money on the needy, homeless, and less fortunate. But is is a small percentage, generally, of the total organizational budget.
Secular charities (CARE, RedCross)are generally no better, as Bobbo and others mentioned.
I hate to keep beating this drum, but until we implement a way to tax consumption, not income (production), without loopholes and write-offs for ANYone, we won’t have a fair system.
BTW- Property taxes are just a way for the Gov’t to own “everything”. If you ever think you “own” real estate…just stop paying your taxes….
Again, eliminating tax deductions to charities does not in any way imply eliminating the concept of a non-profit. Yes, it probably would be beneficial to require that non-profits make their books public but that is orthogonal to the charity tax deduction which only relates to individuals.
Actually, there should be a flat tax on all individual income regardless of source.
From the first dollar to the last dollar.
No “earned income credits”, no deductions for actions deemed worthy by the state.
Taxes are for revenue, not social engineering.
Sure, it would be great to leave charity to the private sector and reduce taxes, thereby shifting the burden of caring for the needy (on a large scale), recovering from natural disasters, etc. to private organizations from the government … except that history shows time and again that people do NOT give to charity at a level that would provide for the needs that the government presently addresses (case in point: Medicare). It’s the same as that ridiculous “trickle-down” economic theory that suggests the wealthy will use their tax cuts to benefit society (by hiring more people, raising wages, and so on), when experience shows that they generally just keep MORE money for themselves and become even MORE wealthy. Bottom line: people, as a rule, are inherently selfish.
The flat tax is ludicrous, too, on its face, for the simple reason that while Donald Trump and I each might be taxed at 25% or whatever rate, the prices of goods and services aren’t similarly based on a percentage of our wealth or income. So that car or that big-screen TV or that loaf of bread costs proportionately more for me than for Trump … and the flat tax becomes yet another boon for the rich.
As a recovering lawyer and a development professional for some 15 years, I recognize that the charitable deduction usually is not a strong motivating factor for those who choose to give. But if you remove it, and then you remove the tax breaks for charities themselves, you’ll cripple their ability to serve the people and causes that they do. And if you likewise remove the ability for government to help those same people and causes, you’ll doom those people and causes utterly … which I think, based on the Republican rhetoric and philosophy of late, is EXACTLY what they want to happen.
“concern that the wealthy would stop donating to higher education”
So the 1917 US tax code was rewritten so that Ivy League colleges would reap the generosity of their wealth alumni. Fantastic for them! Like they really need the money. Meanwhile plenty of less well financed institutions go begging for support, the wealth couldn’t care less about. Not unless they can USE THEM, to avoid paying higher taxes on their gross incomes. And not just donating money. But other things, they over-value the use of. And the government doesn’t question their value estimates, you can be sure.
Love your line, “charities’ adverse effect on the economy itself,” stated with such smug confidence. Almost all charitable institutions these days demand results and bang for the buck for programs they fund. But I don’t want to mess with your ideological purity, so keep on asserting whatever truth you wish to believe.