What happens to the charity industry if the Republican tax plan goes through?
Right now the U.S. has some of the world’s highest income tax rates, a tax deduction for charitable contributions, and, perhaps not coincidentally, the world’s fattest charities (e.g., college presidents making over $1 million per year, some heroes at other types of charities as well).
Today is “Giving Tuesday”. If you give $100 to charity, your fellow taxpayers will chip in maybe $40 of that. If the Republican tax rate cut goes through, on the other hand, though the charitable deduction is preserved, tax rates have been cut to the point that perhaps your fellow taxpayers will be on the hook only for $25. If part of the fun of giving to charity is giving away other people’s money, will donations be cut to the point that managers at non-profits have to sell their houses in the Hamptons?
One could argue that by leaving U.S. citizens with more of what they’ve earned, they’ll buy more of everything, including the bragging and feel-good rights that come with charitable donations. In that case, donations to charity should go up. I’m not sure that I buy this. Aristotle pointed out that one of the problems with Plato’s proposed elimination of private property was that it prevented people from enjoying the feeling of being charitable. The modern equivalent of that is the welfare state. Since the government is supposedly doing everything for everyone, what hope is there for a private individual to “make a difference”? This attitude is on display in a comment to What can we do to help Houstonians?: “We can let our elected representatives know we support appropriate aid for those affected and are willing to pay the taxes necessary to make that happen.”
Readers: What do you think? Giving Tuesday 2018 will be bigger or smaller than this year?
[You might ask about my personal plans. After about 40 years of giving cash to 501c3s I have decided to stop in favor of more personal stuff (possible exception: charities where I actually know the managers and that they aren’t diverting donations into their own pockets, e.g., End of year charity idea: Kids on Computers). From my aviation page I offer to run helicopter tours for charities to auction. And then I find it satisfying to help out individuals, such as the children of this friend who recently died, or the neighborhood K-12 students whom I tutor, or the Harvard and MIT students whom I teach as a volunteer. It strikes me as bizarre that we’ve all come to accept a system where if Amanda Citizen helps Joe Needy directly, she has to provide all of the cash herself whereas if Amanda Citizen gives money to Big Charity that in turn promises to help Joe Needy, the rest of us taxpayers will kick in 40 percent (and then Big Charity will skim at least that 40 percent off the top to pay employees). Plainly the 501c3s are good at lobbying, but why don’t citizens complain about politicians being owned by charities in the same way that they complain about politicians being owned by other special interest groups?]
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