The Problem With Charitable Tax Deductions

A comment I posted on Arnold Kling's askblog on December 1, 2012, "The Tax Deduction for Charitable Contributions:"

A problem with charitable deductions is that it is focused on organizational structure and not actions. If I invite and feed a poor person in my house on Thanksgiving, the tax deduction is not available. If I donate food or money to a food bank or church that feeds the same person on Thanksgiving, I get a deduction.

I get a deduction for giving money to the Red Cross, but do not get a deduction for donating blood to the Red Cross.

If I grocery shop or cook a meal for a needy, ill senior in my neighborhood, no deduction, If I donate to a community organization that has volunteers who do the same thing, I get a deduction.

Charitable deductions are a disincentive to community and social responsibility.

When there is suffering, such as the Haiti earthquake, do we need a tax deduction to motivate us to send money, food, and other items? Of course not.

Let’s eliminate the charitable deduction. If the government takes too much money from us so that we cannot donate as much as we would like to charities, let’s fight for lower taxes and not more deductions.

A reader of askblog posted a reply that enhanced my comment:

Rick Weber on December 3, 2012 at 6:49 am said:

Your point about structure is spot on! A deduction (or credit) is a subsidy (so we get more charity, which is nice) but access to that subsidy requires organizations to meet the unavoidably bureaucratic rules of the subsidizer. The outcome may result in less effective output than if there were no subsidy at all, in addition to any number of adverse unintended consequences such as an increase in the relative cost of directly touching someone’s life.