
The Undermining of American Charity - jonathansizz
http://www.nybooks.com/articles/2016/07/14/the-undermining-of-american-charity/
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Retric
IMO, a great many problems would be avoid by removing the charitable giving
tax break. It not only shifts the Tax burden from the wealthy to middle class
it also subsides the agenda of anyone that can afford to jump though some
hoops.

Not to mention all kinds of corruption where charity rents private land or
uses another company to _. Or charity A takes X% off the top and hand it to
charity B who takes Y% off the top.

~~~
rubidium
There are many, many great charities that would suffer greatly from your
simplistic solution.

As a middle-classer giving >10% of income to charity, it's helpful to not have
that be taxed and enables more to go to the charities.

A more reasonable solution would be a cap on the total amount able to be a tax
break. This would prevent the mega-rich from creating fancy tax-avoidance
schemes, while enabling the charities and regular folks to procede as usual.

Also, DAF's are a really bad idea for receiving tax breaks, as the article
points out.

~~~
Retric
Removing the loophole would lower your tax rate. However, why should I
subsidies whatever you want to have happen beyond that point?

Sell milk? Why not set up a trade association to promote it. It's just
promoting healthy living after all.

~~~
michaelt

      why should I subsidies whatever you want to have
      happen beyond that point?
    

The theory is tax breaks for charity make people donate more, and a dollar
donated to a charity is a dollar that doesn't have to be paid by the
government to do the same thing.

For example, if I donate $1000 to a university, higher education is $1000
better funded. Whereas if the government taxes me $330 and gives that to the
university, then I spend the rest of the money on hookers and cocaine, higher
education is only $330 better funded.

If you're a conservative, you might also think the government is inefficient
and most of that $330 would be wasted in the bureaucracy; that most donors are
basically like you and hold your views because charity is a christian virtue;
or that donations allow donors to choose efficient charities in a competitive
market, driving down waste. If you're a liberal, you might think most of that
$330 will be spent on costly foreign wars and private prisons; that most
donors are basically like you and hold your views because charity is about
putting the good of that many above yourself; or that donations are key to
supporting causes like animal welfare and vegetarianism that are unlikely to
get state funding.

Needless to say, the above assumes charities are basically moving towards the
same public good the government is trying to achieve. If I donate to support
schools with extremist religious views or to support the families of
Palestinian suicide bombers, that's a different matter.

Edit: And complete alignment of charities with the views of government isn't
required. If the tax deduction turns $330 into $1000, the charity only needs
to be 34% aligned with the government for the outcome to be better; so for
example $1000 donated to a religious school that spends $500 on textbooks and
$500 on bibles is better than the government giving $330 of textbooks.

I agree, if this is the rationale for charity tax deductions, that there
should be strict auditing for sham charities and charities that are wildly out
of alignment with the public good.

~~~
Retric
This assumes everything charities do the government would also do which is
clearly false. Thus invalidating the argument as said by your last line.

So, I don't get the point? Is this one of those cognitive dissonance things
where you are supposed to accept two things that can't both be true?

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lgleason
Sadly, the not for profit sector has become a mechanism to avoid paying taxes
rather than groups dedicated towards actual charity. That's beyond some of the
salaries that directors of these organizations are making.

~~~
exelius
I spoke with a CEO of a rather large non-profit hospital system who said,
basically, that the only difference between a for-profit company and a non-
profit company is that the board of directors of a non-profit have much less
oversight to ensure they decisions abide by the charter of the organization.

The way the companies operate is exactly the same: try to make as much money
as possible to donate it back into the charitable trust. But a lot of it goes
to perks and bonuses for executives, along with increased marketing expenses
to continue the "donation" growth.

~~~
rayiner
Why should a non-profit pay its employees less than a for-profit company? The
labor market is the labor market; the feel-good of working for a non-profit
might be a "perk" that justifies a slightly lower salary (like equity in a
startup), but it'll only get you so far. Insisting that non-profits pay people
less just means they'll get less qualified/motivated people.

(And to the extent that the argument is that you don't need to pay $400k to
get a qualified/motivated CEO, then that's true of _any_ company--being non-
profit has nothing to do with it.)

~~~
lgleason
Because they are being funded by tax payers.

~~~
jhbadger
Very few non-profit organizations are "funded by taxpayers". They are not
government agencies but corporations not very different from for-profit ones
except that they don't make a profit (although as mentioned, they can
certainly pay their employees quite well). Non-profits can be funded in a
variety of ways, from private donations (as with most charities), or even by
selling products or services (so long as they don't make a profit, as many
scientific societies do)

~~~
sliverstorm
Tax exempt status is a form of subsidy, paid by everyone who pays taxes.

~~~
Jtsummers
In exchange for that subsidy, the government isn't (directly) running programs
like homeless shelters and food banks. Societal necessities so long as
homelessness and poverty remain parts of our society.

Cut the tax break, fine, but then we need the government to intervene and
provide assistance for citizens.

~~~
dragonwriter
> In exchange for that subsidy, the government isn't (directly) running
> programs like homeless shelters and food banks.

Or, you know, _churches_.

The idea that the tax subsidy is justified by the fact that subsidized
charities are displacing costs that would otherwise need to be born by the
government would probably be more supportable if:

(1) tax subsidized charities didn't perform functions that the government is
_Constitutionally barred_ from performing (viewing the subsidy as an
alternative means of performing government functions, would make subsidizing
"charities" to do such barred tasks a way for government to evade its
Constitutional limits), and

(2) the tax subsidy were the same for all donors (e.g., a fixed proportion
credit) since each dollar given would displace the same amount of government
funds no matter who gives it, rather than escalating for wealthier donors.

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nmeofthestate
For contributors to these funds, am I right in thinking that any tax avoided
just goes into the charitable fund pot - no contributors are dodging tax that
they get to keep by misusing these things? Any money that comes out of the
fund has to go to charity.

Clearly, the financial industry is making money off these products, but the
article makes it sound like people are misusing these things to pocket avoided
tax.

~~~
asbromberg
From the article, it sounds like donors can use DAFs to get a higher tax
deduction. When someone donates directly to a charity, the deduction he gets
is the cost of the donation. However, when someone donates to a DAF, the
deduction is the current appraised value of the donation. This matters when
you consider that donations aren't just cash, but also art, real estate, non-
traditional financial securities, etc. and the different between cost and
current appraised value is substantial.

~~~
hundt
No, that rule is only for donations to certain private foundations. If you
give the "complex assets" directly to the charity you are entitled to a
deduction of the fair market value[1].

However, donating such assets directly can be a hassle to do and relies on
cooperation from the charity; the DAF has people who specialize in this and
will take care of it for you. This allows you to get the biggest possible
deduction with minimal hassle.

This is the gist of most of the tax law complaints in the article: the DAF
doesn't enable you to do anything you couldn't already do, but it makes
everything easier to do, including the things that the author wishes you
couldn't do.

[1]
[https://www.irs.gov/publications/p526/ar02.html#en_US_2015_p...](https://www.irs.gov/publications/p526/ar02.html#en_US_2015_publink1000229765)

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rayiner
This article is just scaremongering at the idea that dirty "profit seeking"
banks would have anything to do with charity, which should be the domain of
those of pure heart. But happens when you give money to a charity or
endowment? If they don't need it right away, they invest it with a bank!

~~~
throwanem
This is an enormously reductive and, I think, inaccurate take on the issue.
Perhaps you have a substantive objection to the several detailed paragraphs in
which the authors describe the reasons why they find DAFs an ineffective
method of making charitable donations. If so, perhaps you'll be so good as to
elucidate it.

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warfangle
Fair warning: this page will blow up your browser history.

~~~
throwanem
How so? It doesn't seem to have done mine any harm; there's the one entry I
would expect, and nothing else.

