Dylan Matthews looks at charitable giving in the US and finds that only a third of all giving actually goes to the poor.
It’s not just that the only people who itemize on their tax returns get to deduct their charitable giving, it’s that most of the actual dollars go to people who are not poor.
Writing on Washington Post’s WonkBlog, Matthews looks at charitable giving from a variety of angles. One study he cites is the University of Indiana’s Center for Philanthropy 2007 study of giving in 2005.
The assumptions of the report are quite generous to givers. For example, when faced with donations that partially benefited poor people but also helped the non-poor (for example, donations to hotlines that get calls from people across the income spectrum), they counted half the donations as donations to the poor. But even so, the report found that only about a third of donations in 2005 were targeted at helping the poor:
Particularly startling is that even when you lump in international aid to the poor (and, of course, the poor in developing countries are much worse off than the poor in developed country) with all miscellaneous donations to help the poor, it’s still less than 5 percent of all donations.
Now, maybe helping the poor isn’t the only, or even the main purpose of the charitable deduction. Maybe part of being a liberal society that tolerates a variety of religious traditions is giving religious people tax breaks on what they give to their churches. Maybe donations to higher educational institutions, even donations that are poorly disguised bribes to get the donors’ children admitted, are worth subsidizing.
But regardless of its other merits, the deduction’s distributive argument seems pretty clearly regressive.
Matthew’s conclusion that charitable deduction is essentially regressive because it’s only open to the relatively wealthy and benefits mainly the non-poor.
From a taxation perspective, I guess, this argument makes sense. But does the idea of allowing tax-payers to deduct contributions reflect an alternative to the society lining up values and social good in a way other than direct policy?
So, here’s my question: is the point of charitable giving simply to help the poor?
Or is ir that the deduction allows people to use money that might otherwise go to taxes go to things that the society values but which might not be funded by taxes? So if the society values education and also values education that is “private” or non-governmental, then using the tax-deduction to allow people to choose whom to support such education might make sense. The same can be said for the arts, for religion, for health, and for charities that care for the poor.
In a society that promotes freedom of expression, allowing tax-payers to choose to support their local arts center instead of paying a little more in taxes, allows us to fund a societal value without direct funding from government.
In a society that does not establish religion, but values spirituality, we allow people to support the faith group of their choice.
Now many of these same groups also receive direct government funding for specific programs in the form of grants or participation in governmental programs–especially in higher education ad in healthcare–but these not only come with considerable strings but also (in theory) promote a specific governmental program that (again in theory) has been decided by Congress.
So is Matthews right? Is the charitable deduction giving a regressive tax-policy in terms of its outcomes? Or is the essential purpose of charitable giving perhaps broader than that?