One of the worst ideas circulating in Washington is the suggestion that the charitable deduction should be slashed or eliminated in order to reduce the deficit. The Wall Street Journal featured a debate in yesterday’s pages on the subject. Daniel J. Mitchell of the Cato Institute argued that the deduction should be eliminated because “there is no evidence that the tax break leads people to increase their giving.” In response, Diana Aviv, the President of Independent Sector, made a number of salient points. In particular, she cited a 2010 Indiana survey in which 2/3 of respondents said they would give less if they did not receive a donation. Indeed, she cited some experts who have estimated that if the deduction were eliminated, giving would decline by $78 billion from the $218 billion given last year.
No doubt, people give for many reasons. But it defies credulity to suppose that our altruism is not assisted by the recognition that there is a tax benefit. Moreover, surely the desire to beat the tax deadline plays a role in the dramatic increase in giving at the end of the year.
Mitchell argues that charitable giving ordinarily stands near 2% of GDP regardless of the incentive. If true, I do not know how to explain it. But I think charities do too much to help people at home and abroad to justify the risk of placing them in jeopardy by playing around with the tax code. This is particularly true of those charities helping the poor. Indeed, to my mind it is shameful that Republicans would even think of playing this game. They typically have opposed government action on the ground that private charities are more efficient. Now many of them are willing to take a river boat gamble on the future of charities even those that provide food, clothing, housing, and medical care to the poor.