Or make changes to the system to reduce the need of charity towards the poor, generally by reducing the numbers of poor.

This would be accomplished, of course, through single-payer health care and a minimum wage that for a 40-hour work week is above the poverty line for a family of 4.

For once I agree (in part) with Mr Reich. Eliminate the deductibility of donations to PRIVATE universities and PRIVATE museums, etc. Continue to allow deductibility to public institutions to help subsidize public funding.

Not to throw a wrench in all this, but why should any charitable donations result in tax breaks?
I mean, if the government wants to encourage people to donate, well, then it should GO FLY A KITE. If, on the other hand, it wants poor people to EAT, then it should give them food. Arts? - fund the NEA. And so on.
Everything else is just whitewash. The only people who benefit from charitable donation deductions are the rich. And if the rich are truly virtuous, they'd still donate, regardless of the tax status of the donation. Anyone taking bets on that?
Now returning you to your regularly scheduled charade...

Poor New Yorkers rarely attend concerts at Lincoln Center."

Maybe not, but almost poor grad students in NJ sometimes take the train in to do so (or attend similar cultural institutions). Haven't y'all heard of nosebleed seats? And student rush? You know ... those people up where you don't see them who are singing along with the show and there to enjoy themselves as opposed to see and be seen?

Well, there's something elegant about the way that the US tax code doesn't make any "value judgments" about the not-taxability of non-profits. If someone objects to the fact that some organization isn't taxed, I can just say, "well, it's a non-profit, just like any other. that you dislike it's mission is unimportant."

However, one of the reasons that people with a lot of money are more apt to donate money to these sort of "lifestyle" non-profits is because they feel that they can see the results more tangibly up-front. You write a check for millions of dolalrs, and the new building wing gets contructed. You endow a chair for a professor, and someone gets hired. You fund a scholarship, and someone gets that money. With more traditional charities, the results are harder to see. I worked with an organization that tutored promising students inthe inner city to guide them through the path onto college. Does it help? Who knows? Does it make someone more likely to go to and succeed in college than they would otherwise? They were still trying to measure that... and the nature of the work is that progress is extremely incremental. I can see how someone with non-profit donations to make, unless he or she has some personal interest in these sorts of programs, is going to spent his or her dollars in such a way in which
the results of the spending are easy to see.

WaPo also has a decent piece of reporting today on a little non-profit that does standard intel consulting work for DoD and the CIA but is getting all the tax free perks. A different non-profit scam but in the same vein of using the designation to boost the income of fairly well off folks.

http://www.washingtonpost.com/wp-dyn/content/article/2007/09/30/AR2007093001402.html?hpid=topnews

"you write a check for a million dollars and the new building gets constructed."

you mean, a building gets constructed with Your Name on it.
a blatant example of visible charity...
one of the most important rules of tzedakah (the giving of charity) is that it should be anonymous and not to bring self-aggrandisement.
one can often walk into religious buildings, and even the water faucets in the restrooms have little brass placards, "donated by the____________family.
everything you touch, has a placard on it.
....just as on special holidays, it is not the humble congregant in the last row who is called to the altar with the honor of reading from a holy book, it is the person who donated the money for the chandeliers in the social hall.

Y'know, I take your point, but to further defend Lincoln Center -- it includes the Metropolitan Opera, which just broadcast its opening night on a screen in Times Square, so I imagine a few poor NY'ers might have gotten a glimpse. It includes the NY Philharmonic, which puts on free concerts in the parks in NYC. It includes with NY City Opera, the whole point of which is to have a lower-priced opera company that more NY'ers can afford to see. Lincoln Center has free outdoor events in the plaza. Etc., etc.

I guess you could just take the attitude that the arts aren't high enough on the list of priorities to warrant this charitable giving, but I disagree. And I personally think Reich's attitude is pretty damn condescending. What, "poor people" don't benefit from a lively arts scene? I think a place like Lincoln Center improves this city, even for "poor people," and if it takes stroking some CEO's ego to get it, that's fine by me.

I totally agree with Glenn. Art absolutely belongs on the list of things that should be deductible. If you buy someone a meal one day, you temporarily alleviated their hunger and showed them that there is someplace they can go for food. That's important. If you make art accessible, then you can show people that there are things in this world that are transcendent and beautiful and that they can experience them the same as anyone else. And if you do that, then you've given them something to live for, which will do more to get them out of hopelessness than any number of free meals. This is important too!

Add to this all of the political nonprofits -- for better or for worse. I like the idea that my tax dollars are subsidizing doctors without borders, but focus on the family I'm not so sure about...

If you revised the tax code to make charitable contributions non-deductible, you'd have to do something about the first amendment; otherwise the government would be smack in the middle of establishing religion (by deciding which religious organizations got a deduction and which didn't). Or you'd have to overturn centuries of jurisprudence establishing the religious exemption. Or you'd make no headway at all, because everybody would become a religion...

I'd address it on the other end.

I'd say that a "non-profit" must spend 5%+inflation of it's money, yearly, on its declared purpose. Fundraising, administration, etc don't count.

I can certainly see Mr. Reich's point regarding a well funded, popular arts program like you can find in NYC. My little hometown local symphony struggles every year, though, and I am happy to help them out and I only get a tiny little tax break for it. I tend to think that the symphony, along with a few art galleries and a playhouse a few other things that struggle to hang on in our little city, go a long way towards making this town a better place to live. And these organizations do give back. The free concerts given at the local elementary schools are virtually the only music history exposure some of those kids get anymore, for instance. Most events we go to are well attended, but it simply costs alot of money to keep these things afloat. Plus, everyone wants to keep the ticket prices low.

Well in addition to Glenn's point on art generally this would simply kill any kind of public fine art museum. That is while some people might still be inspired to donate that Cezanne, without the tax break I would expect the flow of donations to slow to a trickle. And lots of these museums have days with free or reduced admission. I am not sure I want a kind of America where only rich people get to see Picasso.

Moreover this kind of proposal simply slaps around local historical preservation efforts and things like community theatre.

Not everything is Manhatten. I kind of like Reich but sometimes he doesn't seem to actually think things through.

I know the one charitable organization that everyone here likes - the federal government. (Of course, charitable donations aren't normally given because of the threat of prison, fines, or the barrel of a gun.)

And who the heck cares about the motivations of the person giving to a charitable donation? If I give money to PBS, who cares if it's because I want to be recognized in the community or just because I like Big Bird?

And you can't tell me that NPR is a targeted towards helping the poor.

And the claim that Lincoln Center doesn't help in the community is erroneous as well. Check out the Lincoln Center Institute.

My local symphony provides a ton of free concerts.

Not everything is Manhatten. I kind of like Reich but sometimes he doesn't seem to actually think things through.

Understatement of the day...

and people give to charity not simply for the tax deduction - it's not the motivating factor, just a benefit of being charitable.

I give to a local organization that supports families of fallen police & firefighters. If that donation were taxed, I'd probably still give - but I wouldn't give as much or as often, so your point that donations would likely dry up is accurate.

"Focus the charitable deduction on real charities"

We've just got this one going on in the UK as well. (Although our system is very different). The definition of "real charity" is expected to be changed so that private schools do not qualify. It's not so much about donations (because our system is so very different) more about the exemption from sales taxes (VAT) that charities charge upon their services.

It's also nothing at all to do with raising any significant sums of money: 80 million pounds perhaps a year, (0.000016 % of the annual tax take). It's that the political party currently in power absolutely hates the entire concept of private schooling.

And that's where the real problem will be. Defining "real charity".

The "modest proposal" is unworkable because it is impossible to clearly differentiate "real charity" (those for the poor) from the "unreal" ones. I also think that the tax deductibility isn't really a problem. So the fisc is losing 40 bilion a year? Well, much of that money is well spent, if not by providing "real charity", then by creating lasting value for society. And I concur with Glen that cultural institutions do benefit all of society, not only the rich. And to the extent that they benefit the rich more than the poor, that is true of many publicly funded institutions as well. Heck, this is a class society. Of course, the wealthy have more power than the poor to impose their own preferences on public spending. You can't solve this problem by arguing against all - direct or indirect - public funding of libraries, museums, universities etc. Even the publicly funded state universities serve the middle class more than the poor. Revoking the tax status of private universities won't solve the underlying problem.

What concerns me is not so much the tax status but the cultural status of American "philanthropy". Americans, both rich and poor, are generally full of admiration for rich donors. Conservatives like bragging about American "generosity", that is so much superior to the European welfare state. Just check the recent book "Who Really Cares" by Arthur Brook. European tax-funded generosity doesn't count since it is "involuntary". In European cities, you will find libraries, museums and universities that are not named after rich donors. They are called City Library, City Theater etc. and they provide cultural services to all segments of society, although the middle class will still be overrepresented - they are class societies just as well.

What is bothering in the America debate on these issues is that there is so little recognition for the collective effort. The billionaire who gives a few millions to build a library named after him is a shining hero, a true model of American virtue. The community that decides democratically to build a library, and to fund it collectively by paying taxes, gets dissed as Big Government wasting the tax payers' money. Rising inequality in America will likely spur further "charity" by the rich - more proof of America's economic, and moral (which in the protestant mind-set is pretty much the same), "superiority".

What concerns me is not so much the tax status but the cultural status of American "philanthropy". Americans, both rich and poor, are generally full of admiration for rich donors. Conservatives like bragging about American "generosity", that is so much superior to the European welfare state. Just check the recent book "Who Really Cares" by Arthur Brook. European tax-funded generosity doesn't count since it is "involuntary".

scare quotes on involuntary not needed - they aren't voluntary by default.

It's a fact that increased taxes correlates to decreased charitable donations. If people think that their tax money is being used for programs to help the poor, they are less likely to donate themselves - since they "gave at the office." And just because a building is named after a wealthy benefactor and not the City Museum, etc doesn't mean it's inaccessible or non-beneficial to the poor.

The community that decides democratically to build a library, and to fund it collectively by paying taxes, gets dissed as Big Government wasting the tax payers' money.

No, that would be fine... a local community deciding to raise local taxes to build a library happens all the time in America. It's money raised locally to benefit local residents. I would say that I'd prefer it if the money was raised through charitable donations or through municipal bonds (which also have a favorable tax status), but I'll leave the decisions on how to best finance the project to the local leaders and their ability to lobby their constituents.

What is viewed as "Big Government waste" is someone in Alabama paying taxes which end up going to build a library in New York City or some other location.

The definition of "the community" is very important in your example.

Totally agree with this idea. I remember an article posted here a while ago about the new tycoons and their modern-day gospel of wealth, wherein capital gains and high income taxes were pure evil to them but they all trumpeted (in lieu of those things) the merits of charity. Well the problem is charity is never a replacement for government funded social programs that need tax dollars, but moreso its certainly not a replacement when its being used to build up the playgrounds of the wealthy like Carneige Hall and Opera Houses.

In many ways, I think thats a more important point. People always excuse grotesque wealth if those who have it are giving it to charity. The problem is that with the definitions of charity as they currently are, its quite possible that the grotesquely wealthy are only giving charitble contributions that benefit the grotesquely wealthy (or at least fairly wealthy.) Its one thing if Joe Rich gives large portions of his money towards providing college scholarships for the underpriveleged but if he's giving it to his ivy league alma mater then its the equivalent of giving his niece a big chunk of cash at her bat mitzvah. The perception that they are "charitable" is silly and falicious and should be another notch in the argument that there is NO replacement for government funded social programs.

Why not make it simple.

Everybody over 18 and under 70 gets one yearly deduction 75% of Median income so at 48, 201.00 that's 36,150.00 of income that is tax free, no withholding until that number is met. Everybody gets the same deduction, want to spend it symphonies...be my guests...the poor...better yet...need a house...spend it on that.

Stop having government tell people how to spend their money!!!

But if we did that, every right wring organization would be up in arms just as the right wring commenter above are. Hypocrites!

The real technical problem with above is small businesses deductions and the perfectly legal scams they spawn.

"What is viewed as "Big Government waste" is someone in Alabama paying taxes which end up going to build a library in New York City or some other location."

Is this intended to be a precise example or just some random idea. Either way its misleading because, of course, New York City contributes far greater amounts to tax coffers than Alabama does, with Alabama getting far greater remittances from the government.

But on top of that, whats wrond with Alabama paying for a libray in NYC if thats where a library is needed? Whats wrong with taxes being collected in certain places being applied to where they are most needed? Prioritization of funds is the basis of any effective social program in terms of what is bought but also where funds are utilized. Theres nothing wasteful about that.

The question to answer in discussing governmental support for the arts, either through direct subsidy or through tax-breaks for charitable contributions, is simple: is there value to society in protecting some sectors of the culture from the sharpest edges of market capitalism. A symphony orchestra can not survive on ticket sales alone, and in the absense of some sort of revenue outside of "earned income" almost all of them would fold. Is there value to society in having art that doesn't have to support itself? I think so, but it's a personal opinion. If you happen to agree with me, then we have two options -- direct governmental subsidy or tax deductions of contributions. Direct subsidy on the scale that would be required is a pipe dream at this point (and has some other problems as well), but charitable giving is doing okay.

There is a valid point to be made about forgone tax revenue subsidising the leisure activities of the wealthy, but it's also important to note that most of the people who buy tickets to arts events today wouldn't be able to afford ticket prices that accurately relfected the costs of the events. To a large extent the rich are subsidising the leisure activities of the middle-class, so the system IS progressively redistributive.

Furthermore, the amount of revenue forgone by the government in tax deductions is only a fraction of the amount of money trasfered from private hands into public hands. The top tax bracket in the US is 35%, so for every dollar given to charity by a person making more than $350K per year, the US government forgoes 35 cents, and charities get that 35 cents plus 65 cents. If the government took that 35 cents, we need to ask how much of the remaining 65 cents would simply stay in the pocket of the donor.

I don't disagree with Reich and Ezra as much as this post might make it sound -- they have some very important points -- but these are critical considerations for the debate.

To me the most important argument against tax deductions is that they allow rich people to partially opt their tax dollars out of government funding priorities and into their own. Even if you divert charity money out of the arts and academic sector into "real charities" you're not going to get much more money for un-sexy causes. Cancer and Male Pattern Baldness research money will go through the roof, and poverty programs still won't see much of it. Some things are best funded through taxation and some are best funded through philanthropy.

Is this intended to be a precise example or just some random idea

My point wasn't the specific locations, but the fact that people who would not receive the benefit of the spending are forced to contribute the money.

Make it upstate New York vs New York City... or Fed taxes of New York City residents being used to build a bridge for 50 people in Alaska.

Prioritization of funds is the basis of any effective social program in terms of what is bought but also where funds are utilized. Theres nothing wasteful about that.

And who prioritizes the funds? Have you ever heard of tyranny of the majority?

Galen makes some good points... as I mentioned earlier, I could make a strong argument that charitable contributions to NPR are not "real charity," since NPR isn't exactly targeted towards the poor.

However, at the end of the day, I guess what Ezra and everyone here is saying is that you HATE the fact that people are able to decide where they get to spend their money - and, given the option, would tax the money regardless of how it's spent. Can't let a thin dime go to a charitable cause without wanting the Feds to get their 3.5 cents.

pathetic, really.

And, it's not subsidizing the rich - since it's the people's money to begin with.

stwendeler is a typical example of what I am talking about. "Taxes are involuntary by default" - come on. Europeans are paying higher taxes (well, depending on the country of course) because that is what they have decided collectively, by democratic elections and votes. It is immaterial whether this happens on the local, regional, national or even continental level. There will always be some who disagree, and who end up paying for something that they didn't personally approve of. That's democracy, and that doesn't invalidate my argument which is that collective action has an unjustly negative reputation in the US. People like Arthur Brooks contend that a rich person donating a bit of his/her wealth to be commemorated on a plaque is morally superior to the regular person voting for funding some community infrastructure and also being ready to pay his/her share in taxes, however small (in comparison to the rich donor's donation). This morality appears upside down to me.

a local community deciding to raise local taxes to build a library happens all the time in America.

I happen to live in a city in which the library, the performing arts center and important parts of the university have all been donated by rich local donors. I am noting the difference to Europe, where this rarely happens. It is true that Europeans are less inclined to donate to libraries and universities, because they feel that these institutions should be a collective responsibility, funded by the whole community, not just by donors. And they are right. I am certainly glad that we have this splendid library and it does serve our community but I am also concerned about cities that are not so lucky to have rich donors. Those other cities will have to raise taxes to have a library, which means they'll be worse off in competition with cities like mine. In short, if community infrastructure is left to private charity, what happens is that existing inequality will be reinforced. Europeans tend to be offended by the idea of letting rich donors, and the local tax base, decide whether their children will benefit from a well-equipped library, or well-equipped schools for that matter. Many countries therefore have a commitment of mitigating inequality by transferring some resources from wealthier to poorer communities. This is what you are dismissing as "Big government". Only your New York - Alabama example is upside down.

And who prioritizes the funds? Have you ever heard of tyranny of the majority?

That is an issue on the local as well as on the national level. What is your alternative? Letting everybody decide themselves how much taxes they pay, and for what causes? Great. I would be happy not to fund any wars any more. On the other hand this would be a society in which the rich get to decide everything (since you can't implement any policy without funding) without even a semblance of democratic oversight. We might as well abolish universal suffrage. Before the US and French revolutions, it was custom that ownly property owners could vote and hold office. Maybe we should go back to that historic precedent?

"Before the US and French revolutions, it was custom that ownly property owners could vote and hold office."

Actually, this was often the case way into the 19th century.

Going back to Piglet's earlier point, for example, the public pays 90% of the cost for a new sports facility but the corporation that buys the "naming rights" for no more than 10% of the stadium's cost has their name on the stadium, implying that they paid most of the stadium's cost.

Well, there's something elegant about the way that the US tax code doesn't make any "value judgments" about the not-taxability of non-profits.

Historically, that's exactly what happened.

I'd favor a Canadian-style two-tier system. We have a two-tier system for (c)(3)'s, but it's based on public support; the Canadian model bifurcates based on program. Real charities (soup kitchens, etal) would get full exemption & deductibility of contributions, other orgs something less.

Art absolutely belongs on the list of things that should be deductible.

If it's so important, people would do it w/o a state subsidy.

And that's where the real problem will be. Defining "real charity".

To pick a nit of nomenclature: the problem isn't defining "charity" as such, but the "public benefit" provided by the organization. And it's why education is going to come in for such scrutiny (despite education being one of the 4 cornerstones of charity, along with aid for the poor, religion, and the catch-all public benefit providing orgs). It's just hard to see how Harvard provides a public benefit over and above the benefits that any corp disseminates.

A symphony orchestra can not survive on ticket sales alone, and in the absense of some sort of revenue outside of "earned income" almost all of them would fold.

Or....they'd start playing music that people like, and that isn't so stupidly expensive to perform. More interesting chamber pieces, fewer classics. Sounds like a good trade to me. (insert obvious subsidies-to-buggy-whips line here)

Sorry about all the late & run-on comments. I audit charities, and no one's paying attention anyways, so I'm just going to ramble as I see fit.

I'd say that a "non-profit" must spend 5%+inflation of it's money, yearly, on its declared purpose.

We already do this for private foundations (kinda). Anyhoo, 5% is extraordinarily low. And, really, most charities are pretty good due to smart donors that do their homework. Because of all the info on the tubes these days (charity navigator being the obvious example), there's tons of pressure on charities to operate efficiently, such that I don't see any kind of minimum distribution rule being necessary. It'd just be more money diverted from the charity toward people like me that fill out forms.

Canada has a min distribution rule, FWIW. I don't have a lot of understanding of their system, but I get the impression that it doesn't really do anything. If the minimum actually had teeth, charities would scream bloody murder, and I haven't seen any screaming about it.

"Or....they'd start playing music that people like, and that isn't so stupidly expensive to perform. More interesting chamber pieces, fewer classics. Sounds like a good trade to me."

You're not wrong, but you're missing the point of why I brought it up. If you don't think there's value to society in having orchestras around that keep the classic orchestral repertoire alive (and you're entirely within your rights to feel that way) then certainly there's no need for governmental or charitable support to keep orchestras afloat -- but if there is value then these are our options. Suggesting orchestras change their rep doesn't solve the problem of how to keep the non-sustainable repertiore alive.

Well, yeah, I guess I don't agree with the predicate there. (if that music is valuable...)

If you don't think there's value to society in having orchestras around...

Here's the real question: Is it the role of government?

JPE--I think you are missing 2 things in my proposal (also, hello fellow geek-I'm an actuary).

First, it's 5% PLUS inflation--so 8-10%, not 5%. Also, it's really targeted at high-endowment institutions, not donation-driven institutions. 8% of the endowment+property value would be high for a lot of colleges, orchestras, museums, etc.

"Here's the real question: Is it the role of government?"

No! The "role of government" is to build highways, to torture terrorist suspects, and to bomb and invade foreign countries. The idea that government might also have a role in preserving the community's cultural heritage and supporting music and the arts is way off the mark and ab-so-lu-te-ly out of the question.

Yes, that's cute sarcasm, piglet, the obvious rejoinder being that it's a bad idea to let the government even start to decide what the "cultural heritage" is, especially when that decision, like all government decisions, becomes a political one. You want to see culture-by-government body, go down to the Smithsonian's National Museum of American History. It's all unimpeachably "correct", and yet. (The description of Vietnam, for example, is essentially "The Vietnam War was a confusing, helicopter-based war. Also, television!")

There's also the issue that any institution, just like any individual, will tend to locate "authentic" culture in the period of its youth, or relatively shortly before. If you took a snapshot at the height of the Depression, you'd say that our vital cultural heritage was embodied in the vaudville routine, the radio soap, and the tedious, didactic stage play. Hell, if you took a snapshot ten years ago, you could say the three-camera sitcom was an indispensible part of our culture, with half a century of tradition behind it. And yet none of those are active forms today, and I'm not convinced that's a bad thing. It's no accident that European "culture" is usually defined in terms of the things they were best at hundreds of years ago.

Yes, a wonderful idea. The government is always better at deciding where money should be spent than private individuals.

Amen, Comrade.

Maybe not, but almost poor grad students in NJ sometimes take the train in to do so (or attend similar cultural institutions). Haven't y'all heard of nosebleed seats? And student rush? You know ... those people up where you don't see them who are singing along with the show and there to enjoy themselves as opposed to see and be seen?

Word. I have enjoyed several hours of opera from the higher altitude, lower visibility seats (though thanks to the awesomeness of student tickets--possibly the thing I miss most about not being a student right now--I have also enjoyed orchestra seating for $25. for real! AND IT STARRED PLACIDO DOMINGO!). I'm not poor, no (knock wood!), but it's not just the rich that go to the opera.

"the obvious rejoinder being that it's a bad idea to let the government even start to decide what the "cultural heritage" is"

The argument is getting so tired. The question posed was not whether government "decides" about the cultural heritage but whether some tax funding should be provided for cultural purposes (which may or may not include, but should certainly not be restricted to, such weird things as the opera). You may answer that question with "no", that's fine with me, but just don't pretend this is a "big government" issue. Government, at this time and in this country, isn't big in culture, it is BIG in war, it spends more on the military than the rest of the world combined, it is also BIG in the prison business (putting more people in jail than any other country, both in absolute andi n relative terms), it is BIG in corporate welfare. If all of you wannabee libertarians with your rhetoric attacks on "big government", maintaining that this or that shouldn't be the "role of government", were at least consistent in opposing government where it is really BIG, and where it actually hurts people, then we might not need as much sarcasm in this debate.

My second point is that while I am aware of the delicate problems associated with government cultural policy (*), it is easy to point out that it is at least as problematic to let rich donors alone decide what culture is worthy of support, or let the commercial mass market alone decide. And again, you are wrong to assume that this is discussion is about the opera. If "government plays no role" in cultural affairs, close the public libraries, let people read the bestsellers that the publishers have decided to promote, or nothing at all, and that's it. Culture is a much wider issue than you seem to think.

(*) Here's an anecdote that might interest some of you. In the 1980s, there was a series of now legendary youth riots in Switzerland, especially Zurich, known as the 1980s movement. You know what they were protesting against? The opera. They were demanding cultural spaces where they could live their own culture, play their music etc. For the bourgois government, culture WAS the opera, and lavish funding was bestowed on "high culture" institutions, totally ignoring that a large segment of the population didn't identify at all with that kind of culture. Partly as a result of that movement, cultural policy changed radically. There are now autonomous cultural centers in most cities (also elsewhere in Europe), partly subsidized by the public, but organized and operated autonomously, collectively by the users of the center. What is very interesting is that this can happen in a country where every piece of public funding must be approved by majority vote, and majorities are genrally conservative. Still, people have developed a live and let live attitude even toward radical cultural expression. I am missing that atmosphere a lot.

Government gets in the way of a lot more things than they help. We need to put some control back into the hands of individuals, but I don't see that happening anytime soon.

Great post, i've already subscribed to your feed. thanks