Discussing
Christian giving and the myth of charitable tax deductions

Ben Bartlett

Mara
November 28, 2011

Not sure about your tax system in the US. Canada is fairly generous with donors 15% on the first $200 and 29% credit on everything after that on federal income tax with provincial credits varying on the provincial portion of tax. This actually has the net effect of rewarding low income people who give in excess of $200 to registered charities at the tax margin for &gt;$128K. <br><br>I'm pretty sure there are still better ways for the truly rich to save money on taxes. <br><br>I had the wonderful life experience of working for a large charity when I was younger. The main thing I learned about the large donors was they seemed to fall in two groups, the "Karma Hogs" and the "camera shy". The Karma Hogs were generally good people but had budgeted their giving as part of their strategic business plan for their life and wanted people to know they were successful enough to share their wealth with the less well off. To receive their donations we often needed to set up a photo op and later make sure they were included in a lunch or Gala. My favourites were the camera shy who showed up with coffee for the staff and a check for the charity, wearing old jeans and no pretence. I don't know if either of these two groups will be affected too much by changes to tax rates as the motivation I saw was mostly self-actualization and altruism.

Laura's Last Ditch
November 28, 2011

I don't see a problem that the poor are not helped with a tax deduction. First, they have no tax to reduce and can get "paid for being poor" via the Earned Income Credit. Plus, the poor are often the ones who benefit the most from charities. <br><br>Also, the standard deduction is there because it is assumed most people will donate something, or have some sort of deductions. If you don't go over the standard deduction amount, you are actually receiving MORE credit than was due you, and if you go over, you receive the exact amount, with no free bonuses. <br><br>As far as I know, bringing yourself into a lower tax bracket via charitable contributions doesn't lower your tax for ALL your income, only for the income falling above a certain threshold. So, I think rich people still end up with less money by donating, not more. Perhaps there's some rule I don't know about, but this is what I've always read.

Jkuiper
November 28, 2011

Mr. Bartlett-<br>There may be a few wealthy people using complex legal strategies to exploit the tax system and line their own pockets, but your article is a sadly cynical indictment of the majority of faithful and generous givers across the country.<br> <br>I am a Christian attorney working directly in the area you are commenting on and I have had the privilege of working with hundreds of generous families that have used the tax deductions they receive to give more.  I have seen many gifts increased significantly through good planning, with little or no benefit the giver financially.<br> <br>Further, the statement, “This group loves charitable tax deductions because by “giving,” they put themselves in a lower tax bracket and actually save money. In other words, their generosity is really just a tool for greed” shows little if any understanding of how income tax brackets are applied.  It is like saying “borrowing money to buy a house is a good deal because you get a deduction for the interest you pay on the mortgage.”  No financially astute person gives away a dollar for the purpose of getting 25 or 35 cents back, and that is exactly how deductions work.  Deductions only apply to the money given away.  They do not impact the rest of your income.  <br> <br>Charitable deductions are also not any where near as easy to exploit as you imply.  In fact, in most instances, people lining there own pockets with charitable deductions are guilty of breaking the law.  Lowering the deduction will not stop a few cheats from cheating.  It will simply lower the return for the majority of givers that are actually giving money to charity, for charitable purposes, and will leave them with less money to plan and give with.  <br> <br>It is that second group you allude to early on your article that will get hurt.  The group that would give no matter what, but due to these proposed changes, will have substantially less to give.  My professional experience is that the second group is vastly larger than the third, and the third probably doesn’t even exist in the way you think that it does.  Your treatment of this issue seems either too short to be intellectually honest and balanced or grossly uninformed.  It underscores the wisdom of your warning later on:  “…[I]t highlights a common hazard for Christians dabbling in politics: things are almost never as black and white as they seem.”

Jemima
November 28, 2011

Can I clarify - is it the case that in the US the tax goes back to the donor?  Here in the UK the tax gets given back to the charity.

Justin G.
November 28, 2011

I think the points you make at the end of your article are quite sound (especially the second and third, I will address the first at the end), but I don't believe your critique of the charitable tax deduction is accurate.<br><br>As a previous poster noted, its hardly a problem to say that the tax deduction itself benefits the rich more than the poor. The only reasons this is true is because the deduction tracks the rate you pay. Thus if you only pay tax at a 10% rate it obviously doesn't help you as much as if you pay at a 40% rate; however, no sane individual would want to pay higher taxes just so deductions help them more. Furthermore, as noted, if someone is not itemizing their deductions, this is only because the standard deduction gives them more benefit.<br><br>In the second category of those with pure motivation, it is not true to say giving would remain constant even without the charitable tax deduction. Say for example I make 140k a year and am taxed at a 30% marginal rate for any income over 83k (an approximation of the actual US federal tax brackets) and need 110k of income (you can feel free to critique my hypothetical standard of living). With the charitable tax deduction, I can give 39K to a church and it effectively only costs me 30k (I pay 39k in cash, but save 9k in taxes that I would otherwise have to pay). Without the charitable tax deduction, I can only give 30k. Thus, for the person in category 2, the charitable deduction doesn't help me personally, I'm still going to give as much as I can, but it does dramatically help the recieving church/organization because they are now receiving 30% more from the same individuals.<br><br>I'm not convinced the third category exists like you say it does. To be sure, there are many wrong reasons people give to charity, but actually saving money or making money is not one of them. The charitable tax deduction never makes it profitable to give money to charity, it only makes it more affordable based on your federal tax rate. Thus even if someone is paying 35% tax for income over 380k, any cash he gives to charity still costs him 65% of its face value. Again, this doesn't mean someone giving 1 million dollars in cash to a charity is doing it for the right reasons, but even in optimal circumstances for the taxpayer, giving that 1 million dollars still cost him 650k.<br><br>Finally, in regards to the interaction between faith and politics, I think it is interesting to note how you critique the charitable tax deduction as being somehow greedy. Rather, the Internal Revenue Code and precedent interpreting it requires that any tax deduction be made from "detached and disinterested generosity." Furthermore, there are specific doctrines in place to sniff out quid pro quo type transactions where someone donates to a charity and receives some benefit in return. The point is, as you note in your first implication, the law does have moral elements, and it can be ambiguous. However in this case, the charitable tax deduction is by all appearances a mechanism whereby the government intentionally gives up revenue it is entitled to in order to promote generous giving to charities. Sure there are discrepancies and some individuals who manage to manipulate this system; however, the very text of the deduction intends to prevent these abuses.

Jamesggilmore
November 28, 2011

If the tax credit were restricted to things that benefit the poor, this might be the case:<br><br><i>Plus, the poor are often the ones who benefit the most from charities. </i><br><br>But that isn't necessarily so. Donations to high-culture organizations—which, even if they're supposedly for the benefit of all society, don't ever seem to concern themselves with the poor people who can't afford a tuxedo for the opera—are also tax-deductible.<br><br>I think that would be a good compromise, to be honest: A donation is only tax-deductible if the organization to which it's being donated can demonstrate, each and every tax year, that a substantial percentage (at least 50% would be a starting point, but I'd put it at 75% or more) of their funding is directly benefitting people whose annual household income is below 150% of the poverty line. <br><br>So there's my compromise: if you're wealthy and you want to get something back on your taxes with a donation, it's not going to be so you can get a lifetime membership to the opera and hobnob with your wealthy friends; it's going to have to go to something that helps people who don't have wealth.

Micheal Hickerson
November 28, 2011

"...don't ever seem to concern themselves with the poor people who can't afford a tuxedo for the opera..."<br><br>As a former orchestra employee (in the office, not as a musician), I wrote more grants than I could count for our educational concert series, musicians-in-the-schools programs, free public concerts, and many other programs that benefitted the whole community. Many of our musicians came from poor families and used music to escape from poverty - not through their income, but as a source of joy and delight. Many of them also regularly played for free at local churches and community events. <br><br>BTW, you might want to check out some of the free concerts wherever you live. Then you'd learn that very, very few people wear tuxedos to the opera.

Mara
November 28, 2011

Point of fact you are quite correct. Our area has a high school program that provide $5 theatre, concert, opera tickets to selected nights and my daughter and her friends saw close to $1000 worth of culture for less than $60 one year by being diligent. - No tuxedo required, just a student card. I think it included Handel's Messiah and Monty Python's Spamalot.

Dtilma
November 28, 2011

Ben, your post was disappointing and your argument was not very well thought through. Lumping all givers into three categories and assuming the worst motives of 1/3 of all givers is beyond a stretch. Honestly, your post came off as more political and partisan than "thinking" and "Christian." To be clear, a change in the federal income tax deduction for charitable donations would have an extremely destructive effect on local churches throughout America. This leads me to believe you're not a fan of the local church or simply value a specific economic policy over the church. I personally believe the removal of tax exempt benefits for local churches will lead to greater economic and personal persecution. Please reconsider your position.

Jason Erik Summers
November 28, 2011

J is absolutely correct here. B's financial arguments are incorrect on a couple of counts; the notion that giving away money saves money being the primary one. Deductions simply decrease the effective of cost of charitable giving by one's marginal rate (more or less). This allows donors (in the second group) to give more money away for the same effective "price".<br><br>Certainly there are a small number of people in the third group, but the tactics they must use are far more complex (e.g., creating foundations and then making fractional donations of assets to the foundation).<br><br>More germane is the question of whether government should or should not subsidize charitable giving. It does so largely on the grounds that such giving provides public goods that taxes might otherwise provide. Not all (such as James, below) would agree that the use donations serve satisfies this requirement.<br><br>js

Foibled
November 28, 2011

Thank you for this article. It asks hard questions which are the best kind. I do see weakness. The second group, those "genuinely generous people who have money" who "give no matter what", may often give more because of the charitable deduction. They may believe that their favorite charities are more effective than government programs. Lowing the deduction will lower their giving and lower their opportunity to put their money where they believe it serves society best.<br><br>Also, why not take this the other way and incentivize more economic classes to give?

Laura's Last Ditch
November 28, 2011

I used to be a professional classical musician, and can attest that we played lots of "kiddie shows" as we called them, and did lots of community outreach programs. I, too, when I was a student, benefited from the $5 tickets. <br><br>

Ben
November 28, 2011

<br><br><br><br><br>Friends, <br><br><br><br>Thank you for calling me out on some of these points. Basically, I wrote a much longer article and had to cut significant portions out of the article to make it fit. This included two key paragraphs. One on the use of tax shelters and other forms of abuse, as well as a link to an article describing how often “charitable giving” among the top brackets includes organizations that hardly need charity. The other was on the way the charitable tax deduction benefits people in higher tax brackets more than those in lower ones. <br><br><br><br>In trying to cut the article to the right size and summarize my thoughts, I made some gross misstatements... the worst of which was to make it sound like I thought a person could give money and get more money back from deductions than they gave! I did not mean that at all, but there my words are in black and white and I agree that that is how it reads. I feel terrible about that.<br><br><br><br>Further, while putting the article together I gave too much weight in my mind to articles and anecdotes that I have read or heard from friends in business, tax accounting, and political circles.  Abuse certainly exists, but I didn’t have good statistics on it and I should have clarified that.<br><br><br><br>In my mind was this thought: many things in politics and in our lives are different than they appear on the surface, and we have to be careful about those things. Again, I am sorry for any confusion and appreciate the feedback.<br><br><br><br>Ben

Rickd
November 28, 2011

Ben, apologies are rare. Though I am sure I have political differences with you, I respect your honesty. Thanks.

Jason Erik Summers
November 29, 2011

Ben,<br><br>That's certainly understandable.<br><br>You do raise the important point of proximate goods and how they are manifested in politics (and our own personal lives).<br><br>There is also the serious concern you raise again here that deductions place the government in the role of determining what constitutes charitable intent. This produces much disagreement and onerous paperwork for charities (990 forms).<br><br>I'd add to this the issue that we often have theory-of-mind errors when trying to understand the reasoning of wealthy givers (and also with respect to taxing them). Often we come from the framework of folks with average incomes and understand charity as sacrifice. However, no matter how much the Gates foundation donates, for example, Bill will have little of the experience of sacrifice---unless perhaps sacrifice of the idol of security. But this is different than "pain point" so many seem to evoke. I'd argue the former is more theologically correct and the later is more related to the Pelagian heresy.<br><br>js

Kjml
November 29, 2011

I think it is safe to say that if you begin with false assumptions, you will proceed to false conclusions.  As an ordinary middle-income donor, I do appreciate the slight kickback provided by itemizing my taxes.<br>   I give because I'm supposed to give, scripturally speaking, and I don't know if I would give less if there were no tax benefit.  But the fact that there is a benefit helps to steady my hand when I am torn between that middle-of-the month overdraft fee on my bank account and the homeless guy begging change at the gas station.

Chris PrayBuddy.Com
December 14, 2011

Here's the way I see it: Don't give just to get the tax deduction. That would selfish in nature (giving to get something in return). However, if you're going to give to God's work, it's perfectly acceptable to take a tax deduction that it offered to you.

Jason Ellis
April 14, 2013

As much as I wish all deductions were eliminated so we could have a flatter, simpler tax system, I fail to follow Mr. Bartlett's logic. Namely his third category "This group loves charitable tax deductions because by “giving,” they put themselves in a lower tax bracket and actually save money. In other words, their generosity is really just a tool for greed."
The third group in his example IS STILL OUT THE MONEY. That is if their motivation is simply "greed" we have to ask, how is giving money to a non-profit more "greedy" than giving it to the government? Further, why is anyone desiring to hold onto the fruits of his or her labor more "greedy" than politicians and government bureaucrats who desire to take it?

Add your comment to join the discussion!