The Price of Charitable Deductions
In Big Gifts, Tax Breaks and a Debate on Charity, NY Times, Sept. 6, 2007, Stephanie Storm points out the nagging problem about granting income, gift, and estate tax preferences and deductions for charitable gifts.
For every three dollars they give away, the federal government typically gives up a dollar or more in tax revenue, because of the charitable tax deduction and by not collecting estate taxes.
The debate rages regarding whether it is appropriate to impose greater taxes on the general population to reduce the taxes of individuals who contribute to charity.
Mr. Broad * * * says his gifts provide a greater public benefit than if the money goes to taxes for the government to spend. “I believe the public benefit is significantly greater than the tax benefit an individual receives,” Mr. Broad said. “I think there’s a multiplier effect. What smart, entrepreneurial philanthropists and their foundations do is get greater value for how they invest their money than if the government were doing it.”
It is an argument made by many of the nation’s richest people. But not all of them. Take the investor William H. Gross, also a billionaire. Mr. Gross vigorously dismisses the notion that the wealthy are helping society more effectively and efficiently than government.
“When millions of people are dying of AIDS and malaria in Africa, it is hard to justify the umpteenth society gala held for the benefit of a performing arts center or an art museum,” he wrote in his investment commentary this month. “A $30 million gift to a concert hall is not philanthropy, it is a Napoleonic coronation.”
Elaborating in an interview, Mr. Gross said he did not think the public benefits from philanthropy were commensurate with the tax breaks that givers receive. “I don’t think we’re getting the bang for the buck for gifts to build football stadiums and concert halls * * *,” he said. “I don’t think the public would vote for spending tax dollars on those things.” * * *
What qualifies for that tax deduction has broadened over the 90 years since its creation to include everything from university golf teams to puppet theaters — even an organization established after Hurricane Katrina to help practitioners of sadomasochism obtain gear they had lost in the storm.