> The theory is tax breaks for charity make people donate more, and a dollar donated to a charity is a dollar that doesn't have to be paid by the government to do the same thing.

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.)