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Eliminating the Charitable Deduction

December 01, 2010

The Chronicle of Philanthropy published a good article over the weekend about proposals circulating in Congress to cut the deficit by, in part, eliminating or lowering the deduction (currently 35 percent for top earners) for charitable donations. (Click here for the PND version.)

In the December 6 issue of The Nation, David Nasaw, a professor of history at the CUNY Graduate Center and author of a recent biography of Andrew Carnegie, characterizes the charitable deduction as a public subsidy that funds all sorts of activity he finds distasteful and suggests that, at the very least, it's time to "inquire about [its] long-term effects."

Could revising or doing away with the deduction cause charitable giving to drop? Probably, says Nasaw. Defenders of the deduction, he notes,

argue that any downward adjustment will lead to a substantial reduction in the amount given to charity. And that may well be true. But is a reduction in the income, assets and expenditures of the philanthropic sector such a terrible thing, especially when we take into consideration that every $100 donated to charity by a high-income person means $35 less to the Treasury?

The question we have to ask in the end is, Who do we want to decide how our money is spent: wealthy donors or our elected representatives? Does wealth confer on those who have accumulated it special wisdom or enhanced compassion? No one would claim that our elected officials are solons or saints. But I, for one, would rather see a democratically elected body, accountable to the voters, make basic decisions about our schools, healthcare institutions and cultural priorities....

This is a debate that's only going to become more heated over the coming weeks and months, as a new Congress struggles to get the federal debt under control. So here are a few questions for you. Is preferential tax treatment of charitable giving a net plus or minus for society? Would the wealthy give less, or give differently, if the charitable deduction was reduced or eliminated? Should it be eliminated? Discuss...

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"But is a reduction in the income, assets and expenditures of the philanthropic sector such a terrible thing, especially when we take into consideration that every $100 donated to charity by a high-income person means $35 less to the Treasury"

>>> Despicable is the only word I have to describe this mindset. According to this line of thinking, all money is really property of the treasury, and we're only graciously being allowed to keep a small (and ever-shrinking) part of it. You can cloak it in class-warfare "soak the rich" rhetoric all you want, but his message boils down to this: We shouldn't be allowed to use our money as we see fit. Only our elected representatives (including such paragons of honesty like Charles Rangel) should make those decisions.

Sorry Mr. Nasaw, but yes, $100 voluntarily given to charity trumps $35 unilaterally taken by the treasury. EVERY. SINGLE. TIME. But I invite you to send your $35 (or more, don't be a cheapskate) to the treasury. Trust me, they'll take it.

I suspect the real driver of this line of thought lies in this line: "characterizes the charitable deduction as a public subsidy that funds all sorts of activity he finds distasteful" Can't have the "wrong" things funded you know. Only approved activities!


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