Charity Tax Breaks: the Latest Debates

The Chronicle of Philanthropy’s online column, Give and Take, has noted the growing debate about the role of tax writeoffs for charitable giving. The debates have been prompted by a series of articles and opinion pieces in newspapers around the country. Following are some excerpts from the blog postings under discussion:

— From Tomorrow’s Media Conspiracy Today, by Ezra Klein, a writing fellow at American Prospect magazine

“I’m all in favor of supporting the arts and our universities,” writes Robert Reich, “but let’s face it: These aren’t really charitable contributions. They’re often investments in the lifestyles the wealthy already enjoy and want their children to have, too. They’re also investments in prestige — especially if they result in the family name being engraved on the new wing of an art museum or symphony hall.”

Agreed. The tax deductibility of charitable donations to private universities, the arts, and so forth are a bit of a scam. There’s no reason the rest of us should be subsidizing an I-banker’s desire to fund a named chair at his alma mater and, oh yeah, help his kid get into the school to boot.

Additionally, charity has become something of a lifestyle, with large donations buying you entrance into concerts, gala dinners, special exhibits, networking events, and much else. In such cases, charitable donations are closer to purchasing tickets than selflessly and anonymously giving up private wealth for public ends. “So here’s a modest proposal,” finishes Reich. “At a time when the number of needy continues to rise, when government doesn’t have the money to do what’s necessary for them and when America’s very rich are richer than ever, we should revise the tax code: Focus the charitable deduction on real charities.”

— From Trent Stamp’s Take, a blog by the head of Charity Navigator, a watchdog group

Is Reich right that we as Americans spend way too many of our charity dollars on vanity philanthropy, endowing already-rich cultural arts and educational organizations, so we can attend opening night galas and see our names on brass plaques? Of course he is.

But Reich’s wrong in thinking that we can solve this problem by proposing changes to the tax code. Rather than proposing a change to the tax code where an ineffective and inefficient homeless-advocacy group can offer a bigger deduction to their donors than a reputable and high-performing breast-cancer research charity, I wish he’d spend his time trying to figure out ways to convince his rich and influential friends that making a gift to a food bank was a better use of their money than creating another endowed chair at their alma mater. Of course, doing that would mean calling out rich donors, and telling them that they’ve historically been egoists and ineffective givers. And that, I suspect, wouldn’t fly on the cocktail-party circuit. It’s much easier to just blame the tax code.

— From the Nonprofiteer, a blog by Kelly Kleiman, a consultant to nonprofit groups

In his letter to the [New York] Times, Maxwell King of the Heinz Endowments decides to trot out the right’s favorite straw man, inefficient government that squelches innovation, to support his argument that foundations accountable to no one and responsible for nothing in particular are entitled to exemption from the taxes paid by us mere mortals who work for a living.

Whatever the merits of the familiar role-of-government-vs.-role-of-philanthropy debate, that claim can’t be permitted to go unchallenged. Governments, in fact, are quite efficient; that’s why Medicare and Medicaid have less than half the overhead expenses of private health insurers. To manage significant responsibilities, government officials accept compensation significantly lower than their counterparts in the corporate sector — or in the philanthropic sector, for that matter. So which group is providing greater return on investment?

Let us know what you think. Go to http://philanthropy.com/giveandtake to share your thoughts.