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With the IRS "scandal" (and, yes, "scandal" belongs in quotes), we have seen an increased attention to the exemptions built into the tax code for various types of organizations.  In the story in question, the tea party groups had applied for 501(c)4 status, or determination as a "social welfare" organization.  I want to go over the definitions of 501(c)4's, 527's, and 501(c)3's to cover the poles of political activity among tax-exempt groups (other than labor unions, agricultural leagues, and business leagues).  After that, I will discuss the charitable deduction and why I think it is a flawed policy despite its popularity.

501(c)4's are tax-exempt organizations, but donations to 501(c)4's, albeit anonymous, are mostly not tax-deductible. The IRS defines 501(c)4's in the following manner:

Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
501(c)4's are allowed to lobby for specific pieces of legislation; such 501(c)4's are often called "action funds." (That's why every think tank and issue group has an "action fund.") The IRS describes such a group in the following manner:
(a) its main or primary objective or objectives (as distinguished from its incidental or secondary objectives) may be attained only by legislation or a defeat of proposed legislation; and (b) it advocates, or campaigns for, the attainment of such main or primary objective or objectives as distinguished from engaging in nonpartisan analysis, study, or research and making the results thereof available to the public.
501 (c) 4's are allowed to intervene in political campaigns as long as their "primary" activity is still the promotion of the general welfare.  This is why 501 (c) 4's with expensive tax lawyers can design their tax returns to show exactly 49% campaign activity.

527 organizations include political committees (including state, local, and federal candidate committees), political action committees, "Super PACs," and political parties.  527's are mostly tax-exempt because, although their investment income is subject to the federal income tax, the IRS does not include the following sources of revenue in their taxable income:

(A) a contribution of money or other property,
(B) membership dues, a membership fee or assessment from a member of the political organization,
(C) proceeds from a political fundraising or entertainment event, or proceeds from the sale of political campaign materials, which are not received in the ordinary course of any trade or business, or
(D) proceeds from the conducting of any bingo game (as defined in section 513 (f)(2)),
527 organizations, unlike 50 (c)4's, have to publicly disclose their donors and expenditures. 527's can engage in candidate election advocacy, but can only have minimal engagement with legislative advocacy and non-election-related public advocacy.  Donations to 527's are not tax-deductible.

501(c)3's represent the opposite pole of political activity among tax-exempt groups.  This group includes your standard non-profits, houses of worship, foundations, museums, colleges, etc.  The IRS defines 501 (c) 3's in the following manner:

Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
501(c)3's are prohibited from engaging in candidate advocacy.  They can only engage in limited legislative advocacy, but they are free to engage in public advocacy on non-election concerns.  Donations to 501(c)3's, unlike donations to 501(c)4's or 527's, are tax-deductible.

**

Although 501(c)3's, 501(c)4's, and 527's are all tax-exempt organizations, only donations to 501(c)3's are tax-deductible, and the charitable deduction remains very popular.  According to an April 2011 Gallup poll, 71% of those surveyed opposed eliminating the charitable deduction as part of plan to lower the overall income tax rate, and 68% opposed eliminating it as a part of a plan to reduce the budget deficit.  Despite its popularity, the charitable deduction, as I will argue, is a flawed policy.  I will focus particularly on both libertarian and social democratic objections.

We should begin by establishing a definition of charitable giving.  First, charitable giving is a private act; it refers to what an individual does with his/her own money in contrast to what a government does.  Second, the recipient of the money is doing work that the donor expects will advance a vision of the good society, broadly defined.  Third, charitable giving differs from investment in that the donor does not expect pecuniary return on the funds contributed.  So, taken together, charitable giving refers to the private contributions of individuals to institutions that they believe to be advancing the good of society and from which they expect no pecuniary return.  Moreover, in connection to the tax code, we are talking about large contributions;  the IRS only recommends itemization in such cases.  Those who make small donations are more likely to take the standard deduction.

The charitable deduction as a part of a tax code enables an individual to subtract charitable donations from his/her total income, thus reducing the total amount of money on which s/he has to pay taxes.  The simplest set of justifications for the charitable deduction would also be threefold: (1) that individuals as private actors know better how to spend their money to improve society than they do as a collective, (2) that the government cannot by itself address the problems of society, and (3) that the government should provide incentives for private individuals to contribute to the betterment of society.

Even though the first two justifications clearly echo a libertarian philosophy, the last justification runs against libertarian principles, specifically the central claim that the government should be blind to the economic, social, and political activities of its citizenry.  According to libertarians, the income tax is a violation of liberty first and foremost because it removes the blindness to individual economic activity and requires the release of information on economic gains for government oversight.  However, viewing the income tax as a given, it should  be as neutral to the economic activities of private individuals as possible.  Consequently, all tax credits and deductions would be problematic because they consist of actions taken by the government to encourage or discourage private economic actions.  Why should the government's tax collector care whether an individual does or does not contribute to charity? Additionally, why should the government have the right to know to which institutions an individual chose to allocate funds, especially in cases in which no economic gain will result?

A libertarian, or perhaps more appropriately now civil libertarian, argument would continue on church-state grounds.  Among the IRS list of qualifying organizations are "churches, a convention or association of churches, temples, synagogues, mosques, and other religious organization."  The charitable deduction in such cases, then, becomes the equivalent of a government subsidy to religious institutions.  The government is not "establishing" a religion per se, but it is subsidizing contributions of houses of worship--a violation, in my opinion, of the separation of church and state.

The charitable deduction also leads the government to subsidize organizations that are viewed by many as hate groups. Take, for instance, the Westboro Baptist Church, which both the ADL and the SPLC consider a hate group.  White nationalist Peter Brimelow's VDARE Foundation is a registered 501(c)3, meaning that the government effectively subsidizes donations to that organization as well.

The social democratic argument against the charitable deduction stems from opposition primarily to the first aforementioned justification for the charitable deduction and partially to the second justification. In other words, the social democrat does not agree with the claim that private individuals know how to allocate large funds better than the government (those individuals taken together in a collective participating in deliberation) can, and even though the social democrat acknowledges that the government cannot solve all problems, s/he still believes in the power and efficacy of the government as an actor for social betterment.  Although individual wisdom can guide small purchases--the government should not buy your shoes for you, it is not the best guide for the disbursement of large funds with more far-reaching effects. In this context, the charitable deduction is taking money away from the social services that the government provides, depriving it of the opportunity to shore up funding for existing programs or innovate with new ones.  Moreover, especially as they relate to universities, such large private donations can create undue influence on the nature of research itself.  The extra funds in the pool of general revenue gained from the elimination of such a deduction could be used to provide a more robust funding base to universities, guaranteeing their freedom to work for the advancement of the scholarly disciplines and for the public good.  Despite the occasional use of charity as PR or as a tool to advance self-interest, charitable contributions are more oft than not quite noble; however, they are not adequate substitutes for the actions of government and should not be treated as such.

"Yes, I understand both of your points.  But people won't donate to charity without the charitable deduction," you might respond.  To believe so is to have very little faith in human beings.  Are people so selfish and stingy that we need to dangle dollars in front of their face in order to break the vise-like grip they have over their wallets?  Isn't the virtue of benevolence that one expects nothing in return?  Shouldn't the desire to contribute to the betterment of society as an individual be something inculcated in the young through parenting and schooling and, thus, need no financial incentive?  I would not be willing to say that charitable donations would not drop in the face of an elimination of the charitable deduction because I have no empirical proof either way, but I think it would be a sad reflection on human character if they did.

12:53 PM PT: Here's a fun fact.  Independent contributions to the Social Security Trust Fund are tax deductible.  I don't believe that Social Security has an imminent bankruptcy problem (the math there is bunk), but those that parrot such lies, if they care so much about the solvency of the program, could donate to it and get a tax write-off.  Pete Peterson could bequeath some of his fortune to the Trust Fund; groups like Third Way and Fix the Debt could allocate some of the money they spend lobbying to the Trust Fund.  http://www.irs.gov/...  I would applaud their generosity....


Originally posted to Liberty Equality Fraternity and Trees on Sun May 19, 2013 at 11:29 AM PDT.

Also republished by Community Spotlight.

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Comment Preferences

  •  Huh? (4+ / 0-)
    the KKK is a 501(c)3 because it is a membership association
    "The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.  The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency."
    http://www.irs.gov/...

    How does the KKK qualify?

    •  Fraternal societies (5+ / 0-)
      Recommended by:
      DRo, concernedamerican, varro, Kevskos, leema

      I'll fix that. They're probably registered as 501(c)10's--fraternal societies. Donations to fraternal societies are tax deductible: http://www.irs.gov/...

    •  The KKK has a mission to the poor (3+ / 0-)

      In an old newspaper from the 1920s, the Klan is featured as a sort of Rotary Club with Christian church affiliations.  They conducted and presumably still conduct outreach to the poor that involves taking over some food items from a pantry, and perhaps sitting with someone who is sick.  That sort of thing.

      They are obviously more famous for their "outreach" to the black community.

      hope that the idiots who have no constructive and creative solutions but only look to tear down will not win the day.

      by Stuart Heady on Sun May 19, 2013 at 02:23:50 PM PDT

      [ Parent ]

    •  qualifying organizations R churches but not 4 long (0+ / 0-)

       

      Among the IRS list of  a convention or association of churches, temples, synagogues, mosques, and other religious organization."  The charitable deduction in such cases, then, becomes the equivalent of a government subsidy to religious institutions.  The government is not "establishing" a religion per se, but it is subsidizing contributions of houses of worship--a violation, in my opinion, of the separation of church and state.
      However pls. note** and support:

      --- On Fri, 5/10/13, Secular Coalition for America wrote:

          From: Secular Coalition for America
          Subject: The Weekly Wrap Up: Religious Tax Privileging & Marriage Equality
          To: dollparty@yahoo.com
          Date: Friday, May 10, 2013, 1:50 PM

          May 10, 2013
          Religious Privileging in Tax Code Included in House Report

         **" The Secular Coalition is excited to announce that all three of our recommendations on eliminating religious privileging from the tax code have been included in the Joint Committee on Taxation's report to the House Ways and Means Committee, released earlier this week. including the SCA’s recommendations on removing religious privileging from the tax code, in a report submitted yesterday to the House Ways and Means Committee. In its recommendations, the Secular Coalition urged Congress to address religious privileging in the tax code, including requiring religious nonprofits to submit 990 forms like other nonprofit organizations, and enforcing IRS rules that bar churches from endorsing political candidates. The Coalition’s recommendations are included on page 496 of the Joint Committee’s report.

          The Secular Coalition is now urging the House Ways and Means committee to adopt the SCA’s recommendations in the final bill the Committee puts forth to the full House. We will be reaching out to member organizations to coordinate a show of support for the recommendations from the organizations, members, constituents and others"

  •  How does a group qualify for tax-exempt status? (2+ / 0-)


    May 17, 2013

    501(c)(4) groups are supposed to be social welfare organizations that benefit the common good, but Congress has changed the law so often that the tax category now applies to lobbyists and political groups. David Martin reports.

    Congress changed the rules which added to the confusion as to what can and can't be done under it's own laws passed previous!

    Standard questions would already have had pat answers for any group being asked if not changing those questions!!

    "If military action is worth our troops' blood, it should be worth our treasure, too; not just in the abstract, but in the form of a specific ante by every American." -Andrew Rosenthal 10 Feb. 2013

    by jimstaro on Sun May 19, 2013 at 11:57:01 AM PDT

    •  Ummmm (0+ / 0-)

      embed CBS video not embedding at least on my puter. Added link before posting.

      "If military action is worth our troops' blood, it should be worth our treasure, too; not just in the abstract, but in the form of a specific ante by every American." -Andrew Rosenthal 10 Feb. 2013

      by jimstaro on Sun May 19, 2013 at 11:58:09 AM PDT

      [ Parent ]

  •  Charitable contributions are Schedule A itemized (11+ / 0-)

    deductions.  This means that you will generally only deduct a charitable contribution if your total itemized deductions are greater than your standard deduction.  Thus many, many people make charitable contributions that never get deducted from a tax return.

    Unless you make really big charitable contributions, those who benefit from the deduction have big mortgages, high real estate taxes, and a high state/local and/or sales tax payment.

  •  that, of course, is why libertarians are about as (6+ / 0-)

    popular as cow patties, why nobody listens to anything they say, and why they can't get themselves elected dogcatcher.  (shrug)

  •  Borrowing from a NY Times editorial, our tax code (2+ / 0-)
    Recommended by:
    ManhattanMan, Kevskos

    has become so convoluted and dense that Article 501 must be further complicated with Subsection C which must be further confused with Sub-sub-section 3.

    It is lawyers who write these often-contradictory laws which serves their larger purpose of lawyer-full- employment.

  •  "But people won't donate..." (18+ / 0-)
    "Yes, I understand both of your points.  But people won't donate to charity without the charitable deduction," you might respond.  To believe so is to have very little faith in human beings.
    I'll counter that to believe otherwise is to have very little experience in non-profit fundraising.  I've worked closely with a state-level 501(c)(4) organization which subsequently set up a 501(c)(3) foundation.  It's not that people won't donate to the (c)(4) org, but it's a hell of a lot easier getting donations for the (c)(3), especially if you're looking for large (four figures or better) donations.
    •  This (8+ / 0-)

      Tax planning is probably the biggest source of our funding as a 501(c)(3). The most important fundraising season is Oct, Nov and Dec. Why? Because people who will benefit from that deduction on their tax filing at years end will have a pretty good idea of what that year's liability will be and donate accordingly.

      We're grateful to the hundreds of people who donate small amounts but unless a charity has a really aggressive direct mail or telemarketing program (which are problematic for a multitude of reasons) it's the larger donations, the 4 and 5 figure ones, that are the heart of a charity's financial planning.

      47 is the new 51!

      by nickrud on Sun May 19, 2013 at 12:36:48 PM PDT

      [ Parent ]

    •  You expect logical behavior? (2+ / 0-)
      Recommended by:
      Flying Goat, Alice in Florida

      I've worked with charitable (dog rescue) activities for many years.  IME many (most?) potential contributors, however small their disposable income, carefully allocate their donations only to tax-deductible charities, because "that's what you're supposed to do" Besides, if the IRS says it's a charitable organization that means it's ok/safe to give to it (also not true, of course). So even tiny donors who don't itemize or even file look for the 501(c)(3) stamp of approval, and collect those tax-deduction slips!  

      "THERE IS NO JUSTICE. THERE IS JUST US." spoken by DEATH in Terry Pratchett's Discworld books.

      by Sailorben on Sun May 19, 2013 at 04:19:18 PM PDT

      [ Parent ]

  •  A big chunk of my itemized deductions is charity (11+ / 0-)

    related.  

    I give as much as a I give because I CAN deduct it.  If they disallow the deduction, I would certainly have to cut back, because there would be more taxes taken out of my income and nothing to deduct to reduce the tax payments.  

    Obviously, if my deductions save me $600 in taxes per year, if I can't deduct my contributions any longer, I would have to cut back by at least $600 to cover the new tax bill.  

    That means somebody or several somebodies are going to get $600 less from me.  I don't give any one group $600, but I do give $300 to a couple, $200 to a few more and $100 to several others.  None of that includes my church - they are things like Victory Junction Camp, St. Jude's Research Hospital, HSUS, Best Friends, ASPCA, Names Project, March of Dimes, Leukemia & Lymphoma Society, Make A Wish and several local charities for animals and children.  Most of my contributions are memorial type things - Victory Junction is for my dad, Make a Wish for my late FIL, L&LS is for a cousin and a dear friend, the animal organizations are because my son and DIL are both vets and we've seen the cruelty inflicted on critters up close and personal.  I choose my charities for personal reasons or because somebody I loved has it as their last request.  Yeah, I don't have to keep doing it year after year (my dad has been gone 6 years and my FIL 11 years, but I still give something every year to their requested charities).  I sure as heck don't give anything to the KKK or WBC!  

    WBC seriously needs a review of their tax exempt status as a "church" - hate groups should not be allowed to be tax exempt - they are violating anything a "church" stands for, no matter what religion they say they are based on.  All tax exempt groups should be subject to a review that they are keeping the spirit of why / how they got their tax exempt status, their tax return doesn't always tell the whole story.  

    "Focusing your life solely on making a buck shows a certain poverty of ambition. It asks too little of yourself. Because it's only when you hitch your wagon to something larger than yourself that you realize your true potential." - Barack Obama

    by Ricochet67 on Sun May 19, 2013 at 12:30:55 PM PDT

    •  I think it's ok... (1+ / 0-)
      Recommended by:
      tle

      ...that those charities get less.

      We should eliminate deductions and have the government fund things like the healthcare research done by the March of Dimes.

      The money will probably wind up going to the exact same scientists..but without the black-tie Gala Ball in-between.

      This also eliminates the possibility of funding the WBC. The WBC is full of lawyers and they will pass any audit, I promise.

      •  Well bully for you that you think it's just fine (7+ / 0-)

        that charities that are already struggling and are taking care of some of the most vulnerable of our society get less.  If you're okay with that, I'm sure the govenment will get right on making sure those that work their asses off trying to raise the monies necessary to keep these organizations have to work even harder.

        I thought this site was a Democratic site, not a libertarian one.

        You have no argument, just an opinion.

        "If you trust you are not critical; if you are critical you do not trust" by our own Dauphin

        by gustynpip on Sun May 19, 2013 at 02:53:23 PM PDT

        [ Parent ]

      •  That's more idealistic than realistic, IMO. n/t (0+ / 0-)

        Gondwana has always been at war with Laurasia.

        by AaronInSanDiego on Sun May 19, 2013 at 03:47:24 PM PDT

        [ Parent ]

      •  Consider the greater likelihood (0+ / 0-)

        that the deduction is eliminated and all the additional money is dedicated to debt reduction...although, given the ways things stand today, there is virtually no likelihood of the charitable deduction being eliminated. As for "eliminates the possibility of funding the funding the WBC"...not sure what you mean by that. Whoever contributes to that organization will continue to support it, that's not the kind of thing people only support because it's 501(c)3.

        "All governments lie, but disaster lies in wait for countries whose officials smoke the same hashish they give out." --I.F. Stone

        by Alice in Florida on Mon May 20, 2013 at 08:44:28 AM PDT

        [ Parent ]

    •  We should (0+ / 0-)

      just tax you then if you will only give so you do not pay as much in taxes.

      I give because I like people and I see needs that are not being met.  I do not get a special tax break because I do not make enough money to qualify for more than the standard deduction.  

      Make it easy.  Get rid of all tax exemptions.  Gets rid of tax lawyers, tax frauds and useless hunks of the IRS that have to regulate and arbitrate this pile of tax code.

  •  People are not as good as you hope. (9+ / 0-)

    People are helped to decide to do a good thing if they also see some practical advantage.  They are not usually saints doing everything without regard to self interest.

    I started, and for about 5 years ran, a land trust that helped individuals and developers get conservation easements for natural areas on their property. Giving land in this way is no small thing, and the people who did it were generous and wanting to do the right thing, but their decisions were not easy to make, and I am sure that if they were able to get any tax advantages from it, that factored in.  As for the finances of our organization itself, we ran on a shoestring, with fundraisers helping us scrape by.  We were all volunteers, and in addition to lots of educational work, with workshops and publications, we were hands-on stewards of lands we worked to save, nurturing the native plants and clearing invasives.  I hope you are not thinking that a group like that really should be paying taxes on the money we got that barely stretched to keep us functioning.

    Just to finish this scenario, the easements we got then are still protected, but under a much richer land trust, with wealthy donors; some years after I moved from the area, our original trust, which had grown to have one paid employee, was merged into the larger neighboring trust, for the sake of the security of the saved land.  I am very sure that the donors to this larger trust wanted whatever tax benefits they received.

  •  Here's a video you might find interesting (2+ / 0-)
    Recommended by:
    janmtairy, Words In Action

    A Ted talk about charitable fundraising and some of the reasons why we have such strange ideas about how it should be viewed and judged.

    http://www.ted.com/...

  •  I say NO donations should be deductible. (9+ / 0-)

    Not even for charity. Hear me out!

    A tax deduction is basically allowing an individual to allocate money to a pet cause instead of to the Treasury. But it gives the rich more authority than it gives the poor.

    The richer you are, the higher your tax bracket. So when a rich man donates $100 he gets a $35 kickback. A poorer person might only get a $10 kickback because they are in a lower tax bracket.

    The current system implies that if you are rich, your charitable instincts are better for the country than those of the poor...and should get a better subsidy.

    I say give every taxpayer a flat tax credit (not deduction) for charitable donations. This credit should cap at a few hundred dollars.

    But what about the worthy charities that will no longer get money from millionaires? I say let them make their case to the regular people...regular people who will now all have a tax credit to allocate.

    I strongly suspect that a minimum-wage worker knows more about which charities are actually effective than a Wall Street Banker. The minimum wage guy probably knows some of the people who are getting helped.  Why should the banker's gift get a bigger subsidy?

    •  Eliminating ALL tax exemptions for (c)3s is like (5+ / 0-)

      Killing the NEA...  America's artist community, including crafts, music theater etc would wither and die from lack of funds.

      Many, if not most, small and mid sized art organizations live and die by donated monies and there wouldn't be enough to keep these small orgs alive.  I cringe to think of all the wonderful art that was incubated and created at these already cash strapped artistic laboratories

      "You've got to be an optimist to be a Democrat, and a humorist to stay one" - Will Rogers

      by KnotIookin on Sun May 19, 2013 at 01:51:39 PM PDT

      [ Parent ]

      •  NEA contributions are miniscule (1+ / 0-)
        Recommended by:
        Kevskos

        when compared to the political deductions that people like the Koch Bros, Adelson, and Trump deducted.

        If the NEA is to be sacrificed this would be a good deal if we got rid of all deductions.

      •  But we would... (0+ / 0-)

        ...replace the tax deduction with a tax credit.

        The difference is instead of working to please a few millionaires, artists would have to please thousands of Regular Americans.

        Besides, the rich would still give. Consider:

        Currently: A $1,000,000 donation gives a $350,000 tax deduction so the giver is only "giving" $650,000. We, the Taxpayers make up the difference.

        Without the deduction: The wealthy donor would just give $650,000. The remainder would have to be made up with small donations from the tax credits each person would get.

        If you want Art that serves The People, let The People control the funding.

      •  people don't really care about crafts (0+ / 0-)

        and theater, so why should government subsidize a niche interest?

        •  Because, since basically the beginning of the time (0+ / 0-)

          government has also been about the preservation and promotion of culture and society.

          I'll never use a non-urban national park, but I value the underlying premise and support (vehemently) the idea that we as a society will continue to fund them.  I'll never research obscure 1910 literature or 1960s country music, but yet the Library of Congress continues to catalog creative works.

          "The first drawback of anger is that it destroys your inner peace; the second is that it distorts your view of reality. If you come to understand that anger is really unhelpful, you can begin to distance yourself from anger." - The Dalai Lama

          by auron renouille on Mon May 20, 2013 at 12:04:31 PM PDT

          [ Parent ]

  •  Get rid of all of it. (3+ / 0-)
    Recommended by:
    88kathy, big annie, Kevskos

    No charitable deductions. None.

  •  501(c)3's are for citizens to give money (2+ / 0-)
    Recommended by:
    grover, Words In Action

    501(c)4's are for non-citizens to give money (they don't need a USA tax deduction but they need to be nameless.

    "There's not much happening in this town, but what you hear makes up for it?"

    by 88kathy on Sun May 19, 2013 at 02:05:11 PM PDT

  •  This issue could backfire on Republicans (0+ / 0-)

    Only if we take then next year or so to explain it to voters like the Romney Tax Returns were.  

  •  We donate all year, mostly via recurring donations (5+ / 0-)

    At the end of the year, we add it up, take a third of that amount from our savings and donate THAT amount, knowing we'll get it back in our refund in February, which we re-deposit into our emergency fund.  

    (Yes, we're financially savvy people who choose to give the government an interest-free loan all year foregoing .000025% in a saving account).

    Take away the deductibility, and Meals on Wheels, two Food Banks, two charities for veterans, 2 food banks for homeless/low-income owners of pets and 2 other charities lose that not insignificant amount of money.

    The tax code is set up to protect the wealthy. Charitable giving helps a lot of people in need.

    But sure, take away the deduction, and hope that Republicans will send the money to those in need, because they have such a good track record of doing so, right?

    My rebate from GWB was donated to Northwest Harvest and multiplied by the tax deduction. I bet most citizens can't even remember what they spent theirs on.

    But THAT is what Republicans do with tax receipts when they feel there is a little "extra" lying around.... Or they buy stuff like tanks the Pentagon doesn't want.

    © grover


    So if you get hit by a bus tonight, would you be satisfied with how you spent today, your last day on earth? Live like tomorrow is never guaranteed, because it's not. -- Me.

    by grover on Sun May 19, 2013 at 02:50:59 PM PDT

    •  Why should (1+ / 0-)
      Recommended by:
      auron renouille

      the tax code be your guide to charitable giving.  I understand your current logic to giving and why it makes economic sense for you.  That does not make it good tax code, good policy or good government.  This sort of policy makes the government spend money to not collect it.  It provides piles of fake work for accountants, bookkeepers and regulators.

  •  forbidding the free exercise thereof. (1+ / 0-)
    Recommended by:
    LakeSuperior

    The first amendment says no law forbidding the establishment of a religion and free exercise thereof.  

    Taxing contributions to religious organizations would violate the first amendment, the bloogers understanding of taxes and the first amendment is eccentric.  The charitable deduction is not an establishment of religion, it is a free exercise of religion.

    •  Who is proposing taxing such contributions? (3+ / 0-)

      Nobody I know of.

      If I make money, I pay taxes on it. If I give some of it to a church, but can't get a deduction for that donation, that is not a violation of the first amendment. Nor is it a tax upon my contribution.

      Frankly, I'm with other commenters: eliminate the 501 categories altogether. The government spends too much money in order to help people avoid paying taxes.

      "There is just one way to save yourself, and that's to get together and work and fight for everybody." ---Woody Guthrie (quoted by Jim Hightower in The Progressive Populist April 1, 2012, p3)

      by CitizenJoe on Sun May 19, 2013 at 03:46:09 PM PDT

      [ Parent ]

    •  1) Balderdash, and 2) wrong (0+ / 0-)

      "forbidding"?  It says no such thing.  And your misinterpretation of charitable deductions as a "free exercise of religion" is just bizarre.  Following that "logic", churches (and, probably, newspapers) should be subsidized by the government.  The fact that churches are subsidized does not make it constitutional.

      I am become Man, the destroyer of worlds

      by tle on Mon May 20, 2013 at 07:21:14 AM PDT

      [ Parent ]

  •  Thanks (1+ / 0-)
    Recommended by:
    Kevskos

    This clears up a lot.  I agree in a way that "charities" are too broadly defined.  In my opinion, charititable giving for tax purposes should be funding food, clothing, shelter, and medical care to the destitute.  If you want to fund your local orchestra or museum or church that should not be given a tax break.  

  •  Your assertion of only "large donations" is false. (3+ / 0-)
    Recommended by:
    UnionMade, mad cat, Alice in Florida

    1) an itemized deduction will produce an individual tax benefit if the sum of all allowable donations (such as mortgage payments, tuition, health care costs -- in addition to charitable giving) reach a level that beats out the Standard Deduction

    2) it is the sum total of all charitable giving (not necessarily a single huge donation) that counts toward Itemization -- so 100 gifts of $100 each spread out over the year and all over the map are as good as a $10,000 check.

    It certainly changes your implicit suggestion that only bigwigs can benefit from 501(c)3 deductions, if only you were accurate and complete in your assessment.

    It seems curiosity has killed the cat that had my tongue.

    by Murphoney on Sun May 19, 2013 at 03:48:43 PM PDT

    •  I think the confusion comes in (1+ / 0-)
      Recommended by:
      Murphoney

      because almost half of Americans are too poor to owe any income tax at all...so when we look at taxpayers (the only people who take any deductions) we are looking at that 53% Romney was always going on about, and then we have to separate out homeowners with mortgages. So, those who benefit from the deduction are probably in the top 40%, and the larger benefits go to those in the top 20%.

      No one seems to have mentioned that there are limits on how much the truly wealthy can deduct, i.e. 50% and 30% (don't recall exactly how that works out, as I've never made enough to give away half my income)...

      "All governments lie, but disaster lies in wait for countries whose officials smoke the same hashish they give out." --I.F. Stone

      by Alice in Florida on Mon May 20, 2013 at 09:25:00 AM PDT

      [ Parent ]

      •  good points, thank you... separately -- (0+ / 0-)

        I'd meant to write "an itemized deduction will produce an individual tax benefit if the sum of all allowable deductions" in my initial comment.

        felt the need to correct that, not that it seems you, in particular, in any way misunderstood me.

        It seems curiosity has killed the cat that had my tongue.

        by Murphoney on Mon May 20, 2013 at 03:26:13 PM PDT

        [ Parent ]

  •  Fine Diary. (1+ / 0-)
    Recommended by:
    Kevskos

    I'm in favor of eliminating 501s altogether.
    Treat every institution the same. Tax income and profits and assets the same for all of them.

    "There is just one way to save yourself, and that's to get together and work and fight for everybody." ---Woody Guthrie (quoted by Jim Hightower in The Progressive Populist April 1, 2012, p3)

    by CitizenJoe on Sun May 19, 2013 at 03:50:28 PM PDT

    •  tell me where (4+ / 0-)

      a homeless shelter has a profit.

      47 is the new 51!

      by nickrud on Sun May 19, 2013 at 05:07:23 PM PDT

      [ Parent ]

      •  Yeah. People who make the args diarist makes (6+ / 0-)

        are generally completely ignorant of all the ways 501(c)(3)s benefit the most vulnerable people in our society.

        Or don't care, which is even worse.

        It's quite typical, really: a theoretical position with no serious traction on reality.

        Which is:

        Religious institutions are never going to be taxed in this country.

        Deductions to institutions like museums, symphony orchestras, universities, etc., are never going to be taken off the table as landing places for giving by the wealthy.

        So the question is: do you want your wildlife organizations, policy development think tanks that create the research and argumentative fuel for progressive policy, and groups that serve the poor to pay taxes? Because that's the only thing on the table. The big fish are immune--they'll never be touched.

        Have a flagon and discuss the news of the day at the sign of the Green Dragon, or hear me roar on Twitter @MarkGreenFuture

        by Dracowyrm on Sun May 19, 2013 at 05:56:35 PM PDT

        [ Parent ]

        •  putting aside political reality, (1+ / 0-)
          Recommended by:
          Kevskos

          I'd love to see the c3 reserved for two things: bona fide schools and relief of the poor.  no think tanks, no arts, no media critique.

          •  Artists do provide relief to the poor (no snark). (3+ / 0-)
            Recommended by:
            Dracowyrm, elfling, Flying Goat

            Practically speaking, there's a large educational component to the work of many (c)3-qualified arts entities.

            From year-round benefits to the poor such as school visits and museum entry subsidies, to individual events like your local symphony's town-square concert on July 4--arts organizations can and do provide the "relief" of an experience with the arts.

            As somebody whose entire exposure to the arts as a kid was via freebies, I assure you that the school field trips to the Shakespeare Festival, the Symphony and the Art Institute nourished my hungry mind and spirit.

            •  sure, there's a faux-educational component. (0+ / 0-)

              I'd prefer to see the educational prong of charity reserved exclusively for actual schools.  For orgs that aren't schools or for relief of the poor, maybe a deduction worth 50% of the contribution.

              For every kid that was helped by field trips to the symphony, I'm sure 99 were indifferent at best.  Art can pay more of its own way.  

              •  Wrong. Not faux. (2+ / 0-)
                Recommended by:
                mad cat, Flying Goat

                And there are a lot of OTHER public-benefit functions besides those you name which are worthy. How about institutions which restore habitat for biodiversity in areas destroyed by enterprise, like mountaintop coal mining? Or which conserve land to begin with, to enable ecosystems to continue to function? You going to tax The Nature Conservancy on all of its land holdings (making it impossible for them to have any)?

                Or what about organizations which provide education to underserved populations on issues like health, disease prevention, birth control, etc...none of which happens in schools?

                Libertarian solutions tend not only to be based in a primitive understanding of economics, but also to be far to theoretical and one-size-fits-all. It's a complex world. What you propose in the above would be devastating to the most vulnerable people of this country, and the world.

                Have a flagon and discuss the news of the day at the sign of the Green Dragon, or hear me roar on Twitter @MarkGreenFuture

                by Dracowyrm on Mon May 20, 2013 at 06:37:51 AM PDT

                [ Parent ]

              •  I'd throw in medical research... (2+ / 0-)
                Recommended by:
                tle, Dracowyrm

                With the stipulation that all results of the research become public domain.

                •  Flying Goat - the "public domain" challenge (0+ / 0-)

                  The initial break-through invention typically represents about 10% of the total cost to get a new drug through development, clinical trials, and production. It's fine to have the original research be in the public domain, but where does the other 90% of the money come from to actually make the invention useful to improve people's lives?

                  "let's talk about that"

                  by VClib on Mon May 20, 2013 at 09:33:55 AM PDT

                  [ Parent ]

      •  A homeless shelter is unlikely to show any profit, (0+ / 0-)

        of course. Unless it's being run as a scam.
        But what is your point? If the shelter does not make a profit, it's not going to pay corporate income taxes. Why make the shelter jump through the hoops of proving it's qualified to be a qualified social-welfare organization; why have the IRS spend money to make that determination?

        "There is just one way to save yourself, and that's to get together and work and fight for everybody." ---Woody Guthrie (quoted by Jim Hightower in The Progressive Populist April 1, 2012, p3)

        by CitizenJoe on Mon May 20, 2013 at 06:01:06 AM PDT

        [ Parent ]

        •  They might have cash on hand (1+ / 0-)
          Recommended by:
          LakeSuperior

          as reserves. Tax exempt status without deductibility gives you the freedom to manage your money without worrying about the artificial boundaries of the tax year.

          It also encourages a group of people to incorporate into a formal structure, rather than just give their money ad hoc, which they can do without a second round of taxation.

          Fry, don't be a hero! It's not covered by our health plan!

          by elfling on Mon May 20, 2013 at 08:16:21 AM PDT

          [ Parent ]

          •  Good point about the reserves-- (0+ / 0-)

            --and reserves can be held now (as with homeowners' associations) and not be treated as profit.
            Joe

            "There is just one way to save yourself, and that's to get together and work and fight for everybody." ---Woody Guthrie (quoted by Jim Hightower in The Progressive Populist April 1, 2012, p3)

            by CitizenJoe on Tue May 21, 2013 at 06:31:49 AM PDT

            [ Parent ]

    •  A very Republican argument. (1+ / 0-)
      Recommended by:
      auron renouille

      Sounds just like the flat tax...appealing because it's simple. Kind of like austerity economics...unfortunately reality tends to be complex.

      Not to say the tax code couldn't be simpler, but the main problem isn't in the complexity of the code but rather in the process that produces it.

      "All governments lie, but disaster lies in wait for countries whose officials smoke the same hashish they give out." --I.F. Stone

      by Alice in Florida on Mon May 20, 2013 at 09:30:43 AM PDT

      [ Parent ]

      •  How is this a Republican argument? (0+ / 0-)

        The deductions for charitable donations are highly regressive.
        A poor person, or even a middle-income person without a mortgage deduction usually gets no deduction for charitable donations; if they do, the donation nets them perhaps twelve cents on the dollar, whereas a rich person might net 39 cents on the dollar.

        Eliminating a highly regressive tax deduction seems to me to be a progressive action. How is this a Republican argument?

        "Charities" like, say Komen, allow corporations who hold patents on individual human genes to contribute to highly politicized actions (and defend their own immoral ownership of patents on your genes and mine), and get to take a deduction for it.

        "There is just one way to save yourself, and that's to get together and work and fight for everybody." ---Woody Guthrie (quoted by Jim Hightower in The Progressive Populist April 1, 2012, p3)

        by CitizenJoe on Mon May 20, 2013 at 11:13:55 AM PDT

        [ Parent ]

  •  Would a libertarian see a tax deduction that way? (1+ / 0-)
    Recommended by:
    johnny wurster

    I'm not sure that a libertarian would view a tax deduction as a government subsidy.

    The charitable deduction in such cases, then, becomes the equivalent of a government subsidy to religious institutions.
    This viewpoint suggests that the government is the primary owner of the money.  A libertarian may view this as the government not taking what rightfully belongs to the citizen.

    It should also be pointed out that a charitable gift in the amount of $100,000 would only result in a loss of $35,000 or so in government revenue.  If the deduction prompts people to give money towards education, medicine, science, etc., the results would almost certainly be a net positive for society.

    No one could make a greater mistake than he who did nothing because he could do only a little. - Edmund Burke

    by AdirondackForeverWild on Sun May 19, 2013 at 05:40:37 PM PDT

  •  Guidestar (5+ / 0-)

    This is an excellent post and I agree with the OP's position.

    Guidestar (www.guidestar.org) provides financial information about non-profits. You need to register but registration is free and allows you to see scans of the non-profits' tax forms and some other data.  (Guidestar also offers paid memberships which allow you to access
    additional information in a form that might be more convenient.  This option would be appropriate for people who donate large amounts of money to numerous organizations.)

    I think it is foolish to donate to a non-profit without obtaining their financials from Guidestar or other sources.

    I understand that many people think that the government's granting of non-profit status is some sort of seal of approval.  Unfortunately, this is not true. Although a 503(c) is prohibited from certain activities there is no requirement that it actually use donations to carry out its supposed mission -- for example, some non-profits use up almost all their donations paying salaries to their officers.

  •  Ask the Executive Director of your state (4+ / 0-)

    nonprofit association what would happen. Have a cardiologist with you.

    Your analysis makes a certain sense. It would just upset a zillion apple carts, many, many of them selling the only apples in town.

    On the other hand, I have been becoming less and less supportive of taxation as a way to support social programs simply because more than half the money goes to "defense" and other forms of corporate welfare. Perhaps that money would be spent better directly by splitting it between those in our communities and in other communities who need the services.

    It's a complicated issue with no easy answers.

    Re: "...will the American people notice, or are they dumb as sticks to quote the social historian Morris Berman who blames the culture for our problems." - don midwest. They're all Woodies and Twiggies, don.

    by Words In Action on Sun May 19, 2013 at 07:50:05 PM PDT

    •  Where is separation of church and state? (1+ / 0-)
      Recommended by:
      Words In Action

      All churches qualify as 501(c)(3)'s automatically without application.  Therefore all donations to churches are tax-deductible.  They do not pay sales taxes on their purchases nor real estate taxes on their properties.  Therefore all taxpayers are subsidizing churches through all sorts of taxes.  Where is the separation of church and state?

      The better I know people, the better I like my dog.

      by FTL BILLY on Mon May 20, 2013 at 05:24:56 AM PDT

      [ Parent ]

      •  its that devil in the detail thing. (1+ / 0-)
        Recommended by:
        Words In Action

        If they aren't paying taxes...of course "we" are subsidizing them. Whether we are talking churches or any other institution.

        While we might have separation of church and state in its strictest sense ...we do not seem to have separation of state dollars and church.

        “... there is no shame in not knowing. The problem arises when irrational thought and attendant behavior fill the vacuum left by ignorance.” ― Neil deGrasse Tyson, The Sky Is Not the Limit: Adventures of an Urban Astrophysicist

        by leema on Mon May 20, 2013 at 08:05:09 AM PDT

        [ Parent ]

      •  "Separation of Church and State" (1+ / 0-)
        Recommended by:
        Words In Action

        is not in the Constitution...look it up. While it is true that the decision to make religious organizations more or less automatically tax-deductible amounts to a subsidy to religion, that does not violate the clear intent of the First Amendment which simply states that Congress shall make no law "respecting the establishment of religion, or prohibiting the free exercise thereof"...some may argue to what extent the subsidy, available to any and all religions, amounts to an "establishment" of religion in general...but so long as no particular religion is favored it is hard to argue that this constitutes "establishment." When we talk about "separation of church and state" generally it refers to attempts to inject prayer or religious practice into the public sphere, which is more clearly "establishment" of religion, because it means putting the non-religious or members of religious minorities into the position of participating in a religious practice against their will. (Note: paying taxes is generally against everyone's will, and the courts do not recognize the status of taxpayers as having standing to sue in court over anything their taxes pay for....the only time a taxpayer is considered to have an interest recognized by the court is when the issue is the tax itself.

        "All governments lie, but disaster lies in wait for countries whose officials smoke the same hashish they give out." --I.F. Stone

        by Alice in Florida on Mon May 20, 2013 at 10:02:49 AM PDT

        [ Parent ]

  •  Well shit-howdy (0+ / 0-)

    Those goldurned congress-critters in DC are crooked as a lighting-bolt, and writin' tax-laws to help out with the campaign contributions.

    I'm shocked. Shocked, I tell you. Where's my fainting-couch when I need it.

    I'm sure the Supreme Court or whoever is sitting in the executive chair will fix this in a hot jiffy.

    Or not.

    Suspend disbelief. It's gonna get confusing as hell soon enough.

    by Anthony Page aka SecondComing on Mon May 20, 2013 at 05:54:46 AM PDT

  •  I'd say split it. Make only such donations as are (0+ / 0-)

    earmarked for direct charity - feeding the poor, getting them glasses, etc, untaxed, and fine heavily any organization that uses such donations for anything else, such as 'overhead', beyond, say 5%.  95% of any such money has to go out again directly to the poor.   You want to help the poor?  Great!  But don't expect to suck a huge salary for mismanaging collected money.

  •  This diary is more appropriate for Red State (0+ / 0-)

    than for Daily Kos.   The diary writer contemplates utter destruction to the non-profit educational and charitable sector and there isn't any connection for this call with progressive values.

    Why this is on the recommended list on a progressive politics site is absolutely beyond understanding.

    •  I beg to differ (0+ / 0-)

      First, I do believe that 501 (c) 3 organizations should remain tax exempt.  I do not believe that charities, nonprofits, museums, educational institutions, etc., should have to pay taxes if they are not profit-making institutions. I think it would be destructive to the vibrant world of associations and cultural institutions to place such a financial burden upon them.

      However, what I do find problematic is allowing individuals to deduct their charitable giving from their total income when they file taxes.  Charitable giving is an individual choice.  I believe people should donate as their finances allow, and I'm sure many could give more than they currently do.  However, it is not the role of the government to subsidize the donations of private individuals, especially when that lost revenue could be better used elsewhere.  Granted, I don't want additional revenue going to fund wars or the increasing militarization of the country--as much of our budget does; my argument, consequently, is more in terms of theory than in terms of concrete implementation.  

      As I see it, almost every deduction and exemption in the tax code is a sign of flawed policy.  The employer based health care tax exemption?  A necessary evil in a health care system that does not offer universal care as all other industrialized nations do.  The child care credit?  Our failure to provide robust child services, such as day care or the extensive support offered in countries like the Netherlands.  The various higher education credits?  The fact that education in this country is far more expensive than in any other industrialized country and puts millions into debt.  

      I think the government could do more to fund public universities, museums, and the arts as other countries do as European nations do.  I think the government should do more to fund public health, child care, and education.  I would love to see the revenue gained from the elimination of the deduction go to such purposes.

      I would hope that people do not just give to charity because they can write it off on their taxes.  That belief stems from a depressingly cynical view of people and their intentions.

  •  This may be a limited sample but we had an (0+ / 0-)

    interesting reaction to charitable giving 501 c 3 type in conversations with French citizens.

    They believe that if a need rises to the point people need to give to solve the problem then the "general welfare " would demand that the Etat (state, but really the commonwealth) steps in and addresses the need usually through targeted tax and distribution.

    They were aghast at how we do these things in such a patchwork way and that only those who directly care opt in to resolve the need. They wondered why we have a "state" at all considering how we do these sorts of things.

    Interesting take on "charitable giving".

    Science is hell bent on consensus. Dr. Michael Crichton said “Let’s be clear: The work of science has nothing to do with consensus... which is the business of politics. Science, on the contrary, requires only one investigator who happens to be right,”

    by Regina in a Sears Kit House on Mon May 20, 2013 at 12:24:55 PM PDT

  •  Awesome diary - I've referenced it (0+ / 0-)

    to counter the onepercenter trolling that these kind of diaries attract....

    The "extreme wing" of the Democratic Party is the wing that is hell-bent on protecting the banks and credit card companies. ~ Kos

    by ozsea1 on Wed May 22, 2013 at 03:11:02 PM PDT

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