As a middle-classer giving >10% of income to charity, it's helpful to not have that be taxed and enables more to go to the charities.
A more reasonable solution would be a cap on the total amount able to be a tax break. This would prevent the mega-rich from creating fancy tax-avoidance schemes, while enabling the charities and regular folks to procede as usual.
Also, DAF's are a really bad idea for receiving tax breaks, as the article points out.
Sell milk? Why not set up a trade association to promote it. It's just promoting healthy living after all.
why should I subsidies whatever you want to have
happen beyond that point?
For example, if I donate $1000 to a university, higher education is $1000 better funded. Whereas if the government taxes me $330 and gives that to the university, then I spend the rest of the money on hookers and cocaine, higher education is only $330 better funded.
If you're a conservative, you might also think the government is inefficient and most of that $330 would be wasted in the bureaucracy; that most donors are basically like you and hold your views because charity is a christian virtue; or that donations allow donors to choose efficient charities in a competitive market, driving down waste. If you're a liberal, you might think most of that $330 will be spent on costly foreign wars and private prisons; that most donors are basically like you and hold your views because charity is about putting the good of that many above yourself; or that donations are key to supporting causes like animal welfare and vegetarianism that are unlikely to get state funding.
Needless to say, the above assumes charities are basically moving towards the same public good the government is trying to achieve. If I donate to support schools with extremist religious views or to support the families of Palestinian suicide bombers, that's a different matter.
Edit: And complete alignment of charities with the views of government isn't required. If the tax deduction turns $330 into $1000, the charity only needs to be 34% aligned with the government for the outcome to be better; so for example $1000 donated to a religious school that spends $500 on textbooks and $500 on bibles is better than the government giving $330 of textbooks.
I agree, if this is the rationale for charity tax deductions, that there should be strict auditing for sham charities and charities that are wildly out of alignment with the public good.
The second half of this theory is obviously unsound when the definition of "charity" is not limited to functions that would otherwise be performed by the government and which directly reduce government expenditures in those domains.
It is especially ludicrous when the definition of charity for which subsidies are provided includes, e.g., religious institutions, which perform functions that the government is Constitutionally barred from performing, which are obviously not functions that the government would otherwise be required to perform.
(The first half -- that providing a public subsidy for an action encourages that action -- is true, but it doesn't make a lot of sense for that to be an income-weighted subsidy. Were the second half sound, the first half would be better served by a tax credit for, or proportional to, the amount of donations, rather than a tax deduction.)
So, I don't get the point? Is this one of those cognitive dissonance things where you are supposed to accept two things that can't both be true?
Even in areas where it looks like things align say non religious textbooks failing to teach evolution has very real and very negative results, just look at antibiotic resistance. The long term impacts of that may very well outweigh all positive effects of charitable giving in the US.
And it's not just education. Handing out AIDS medications in poor counties sounds great! Doing so poorly may quickly make those same medications useless.
Thought experiment: what would the charitable landscape look like if charitable donations deducted directly from tax burden, not from taxable income? (Perhaps with some upper limit.)
That said, I don't think the "donor-advised funds" mentioned in the article make sense; the tax break should occur when actually donating to a registered charitable organization, not just when setting the money aside for an eventual donation.
It provides a major motivation to spend wealth via charities. The extent to which that corresponds to doing good to others is what's in question.
> Thought experiment: what would the charitable landscape look like if charitable donations deducted directly from tax burden, not from taxable income? (Perhaps with some upper limit.)
Even worse, I would think.
The tax break is equivalent to a matching program coming from public funds. Thought experiment: if you were setting up a matching program that used public money (i.e. tax income), what would your criteria be? Is that an appropriate use of public funds at all? I can see that some causes might be good enough to contribute public funds to (though in that case why not spend tax money directly on that issue, rather than via a private foundation?), but any and all organizations that happen to be structured as charities?
No, not even remotely. It's a mechanism to reduce public funds and leave more money in people's hands. In accounting terms, a tax deduction doesn't belong in the "expenses" column; it decreases the "revenue" column.
> Thought experiment: if you were setting up a matching program that used public money (i.e. tax income), what would your criteria be? Is that an appropriate use of public funds at all?
Almost never, no. The only case I can think of that would ever be appropriate might be as a means of allowing people to direct spending in a particular area already considered within the purview of government, allowing people to select from a variety of competing services while amplifying their spending power to allow them to afford something considered a necessity. As a means of re-introducing competition to improve quality, it might make sense. (But only after carefully determining that the expenditure in question should actually fall within in the scope of government.)
Waste is insidious. The US government spends more per person on healthcare than Canada and get's far less for it's money.
Apart from that, taxation already burns up a fair bit of people's goodwill; it's a lot harder to get people to donate when they're already involuntarily "donating" to a wide range of causes they don't support. A tax break for charitable donation gives people the ability to support causes they actually do support.
The ones that are incredibly efficient are the ones that deliver on their mission well for the amount of dollars that go into them; this may or may not correspond to a low share of money spent on administration.
In charities -- and the same is true for public agencies -- people love to complain about high administrative overhead, but then also love to turn around and complain when ineffective administrative oversight results in non-administrative uses of funds being wasteful or ineffective, asking why controls weren't in place to prevent that.
Further, overhead is only part of the problem. Many fund crap.
That's an incredibly entitled attitude (specifically, "entitled to other people's money"). Paying less in taxes is not equivalent to "taking money" from others. If you want to take less money from everyone, decrease taxes, or eliminate actual tax loopholes and deductions that don't provide a net good in the world (or serve any function at all other than rewarding those who bought and paid for them).
Let's setup a charity to lower the drinking age. I am sure we can get some donations from here and there.
Not at all. Taking away a tax deduction is equivalent to raising taxes, and will do absolutely nothing to decrease taxes for anyone. Now, if you wanted to propose a bill that eliminates a tax deduction and simultaneously lowers the tax rate to keep it revenue-neutral, then at that point you could argue for the benefits of that tax cut. But a tax increase in any form defaults to becoming more revenue, and tax cuts occur separately. (I'd love to see those two things inherently connected by law, but that hasn't happened.)
Also, if you actually proposed that bill, opponents of it would reasonably ask, of all the sources you might use to fund your tax cut, why you decided to start by raiding charitable donations instead of a thousand different items in the "expenses" column. Do you really believe that, of all the possible ways to fund a tax cut, the most important would be to target charitable giving?
> Further, your sidestepping the crap argument.
If you think some charities shouldn't receive 501(c)3 status, I'd agree, and I'd argue for stricter review processes. If you think all charities shouldn't, then I invite you to make that argument to the general public and see how they respond to it.
The burden (the cost source of the tax) exists. How the burden is served can leverage individual self-interest to create, maintain, or change behavior (tax deducations). A change in available cost sharing tactics (taking advantage of a burden reduction as it exists or does not) is not a change in the burden. It is not the same as raising taxes (ie tax rate).
I am not interested in stepping into how terminology between rates and fixed fees is confused across a multitude of localities.
If you did absolutely nothing else it would reduce government debt. Which reduces future taxes.
I understand your position, and I'd actually favor a tax structure that has a much lower rate and almost no deductions (making everyone's taxes far simpler than even the one-page 1040-EZ, and completely automatic). That would leave people more than enough for charitable giving and many other things. But unless that comes as a package deal eliminating all deductions and lowering taxes accordingly, I wouldn't support eliminating a tax deduction for charitable giving while leaving the myriad other deductions.
Of course our GDP and tax rates has grown over time, but not nearly as quickly as debt interest. So, without doing excessive analysis we would probably have a national surplus if literally nothing else changed in the tax code or spending.
Granted, arguments about lowered GDP and other knock on effects are reasonable. But, suggesting no long term tax breaks seems unlikely.
It at least would be desirable to stop it from being a deduction and make it a credit at some percentage of donations, about equivalent to the income tax rate on the median dollar of income nationally.
That would, at least, remove the current issue where the public is effectively subsidizing the charities favored by wealthier donors at a higher rate than those favored by less-wealthy donors.
Want to get Justin Bieber to play for your small down? Don't worry you can get that subsidized! Just call it an art's festival.
If the government would otherwise be financing the festival, then yes, otherwise no tax credit, and IMHO, no tax break, should be given.
Not to mention all kinds of corruption where charity rents private land or uses another company to _. Or charity A takes X% off the top and hand it to charity B who takes Y% off the top.