The Politics of Giving: Are All Charities — and Deductions — Equal?


CB101945The major media, websites and blogs have yet to pick up on it, but the Chronicle of Philanthropy has put an intriguing, recently released paper by a pair of academics under its microscope.

What the paper contains, it turns out, could well affect long-term thinking regarding tax-deductible charitable donations, something President Obama may already be tinkering with.

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Outside of tax-code discussions and arts-administration wonk-fests, most average citizens believe that a donation is a donation is a donation and a deduction is a deduction is a deduction. You give to a charity and you can take it off your taxes to the extent (one hopes and presumes) allowed by law. What the two professors at the University of California, Davis, have discovered, is that sometimes the elasticity of the tax benefit doesn’t matter very much. This is almost counter-intuitive: If you could deduct more, you could give more, right? Not always so.

As the Chronicle explains it:

Tax incentives had little or no effect on donations to charities in the fields of health, human services, or public and social benefit. But they did influence giving to organizations devoted to animals, arts and culture, education, and the environment, as well as to private foundations.

If that’s the case — and the paper makes clear more study is needed — then the President, who is said to be weighing “limiting tax breaks for itemized deductions” as a way to help finance health care, may have some political cover. As the Chronicle puts it:

If charitable deductions don’t influence how much people donate to soup kitchens or women’s shelters, should they be revoked…since they cost the government money without expanding giving?

And if more findings were to prove that deductions for “animals, arts and culture, education, and the environment, as well as to private foundations” are more valued, should these deductions “be expanded and enriched”?

Don’t bet on it. But read up on the study and analyze the methodology. Very engaging stuff.