How much more money would we take if the charity tax was removed? What’s the significance?
I don’t understand. What “charity tax”? Are you talking about the charitable givings deduction? Or the untaxed income of non-profit organizations?
charitable deductions
I think removing the deduction for charitable givings would probably affect the amount of charitable givings in a significant way, but for a WAG, this site “estimates that individual giving amounted to $258.51 billion in 2014, an increase of 7.1 percent in current dollars from 2013. This accounts for 72 percent of all contributions received in 2014.”
If we were to assume (and this assumption is almost certainly wrong) that nothing were to change if the charitable givings deduction were eliminated, and that money was instead taxed at individual and corporate rates, you might expect it to bring in something like $100 billion in tax revenue. That’s almost certainly an overestimation, but even if it were accurate, $100 billion is a pretty small sliver of our ~$4 trillion federal budget.
ETA: tl;dr = the additional money “we take” would not be very significant in the grand scheme of things
One would assume charitable giving would go down. It wouldn’t stop but the big donations would probably thin out a lot.
How much is hard to say but while the government would get more tax revenue one would assume there would become a bigger drain on government resources as people who were helped by charity would now probably look to the government for that help.
How that would all balance out I have no idea and is probably a topic for a PhD thesis.
I’d guess not a lot. My guess is that most giving doesn’t get deducted for the same reason that most medical expenses don’t. You have to give/pay enough to make itemizing worth while. And if you make enough to be able to give enough to successfully make the deduction, you could decide that it’s not something you want to do without that deduction.
So some of the big giving would go down. The government would make money on the remainder, but that’s the remainder of big ticket individual giving. The government wouldn’t make a dime off of most of us.
Let’s suppose I can afford to give $10,000 to charity. (I’m pretty well off but not rich).
a. Scenario 1 : I can deduct the $10,000. I give the charity $10,000
b. Scenario 2 : I cannot deduct it. I give the charity $6000 and pay $4000 in taxes.
As you can see, it doesn’t actually affect “giving”, the amount given is the same, it’s a tax on charity services itself.
This is ethically questionable to do. Essentially you’re taking 100 billion dollars from those who need it the most (generally charities don’t help people who are well off though there are exceptions) and giving it to the government.
If the government needs more money, it should levy the taxes elsewhere.
You’re going to have to show that charities are efficient.
First, how much charitable giving goes to professional fund raisers and how much to the intended charity? Here is some old data that shows only 32-60% of money raised actually made it to the charity: Charity Ratings and Donor Resources | Charity Navigator
second, how efficient is the intended charity?
Third, is the intended charity in the public interest or is it self serving? For example, set up a charity that hires my relatives at great salaries and benefits to care for abandoned hamsters in Hawaii. IMHO, I’d rather that tax trade off go to Uncle Sugar. Of course, there is the example of the Bill and Melinda Gates foundation that is highly efficient, and targets reasonably successfully getting NGO’s, governments and others to also kick in for measureable results.
Fourth, I personally would prefer to see the government getting the tax revenue versus charities getting tax breaks for causes I’m vehemently opposed to. FWIW, government is theoretically answerable to the people for where the tax dollars get spent.
My WAG is that a “lot” of major giving for tax write offs is pretty self serving and probably a net negative. Sheesh, I’ve gone to plenty of charitable events that were a pretty fancy dinner/ball, where I’m sure that my $200 per head went largely to overhead. IMHO, charitable giving should be a personal decision, and not a tax break worthy endeavor.
What do you mean by “overhead”? If you’re talking about the actual cost of the fancy dinner - that is the cost of the catering hall, food, waitstaff, entertainment,etc — that should actually be shown somewhere on your ticket or whatever paperwork you got when you paid for the invitation. And that amount isn’t tax deductible- if the ticket was $200 and the actual cost of the dinner was $75, then you only get a charitable deduction of $125.00.
Unless the laws have changed recently, I haven’t attended an event like that in a long time.
But you’re right, in terms of the best use of your charitable contribution, it would be better to send them $200 and skip the dinner.
Or go to the dinner and give them $275. One of the things I give to is a listener sponsored classical radio station. If their pledge gift is interesting, I ask for it - but I give them more than the pledge amount to cover it.
And the comment above about knowing the cost of the dinner is correct - my receipt deducts the cost of the gift in the amount I can deduct.
Medical expenses are only deductible if over 10% of your income (unless you are over 65). Charitable giving is deductible from dollar one.
And I’d wager that most charitable giving in dollar terms is given by those who can deduct it.
I don’t give nearly enough, but it does make a difference in my taxes. And the year we donated our horse to a charity it made a huge difference.
Since I suspect religious giving would still be deductible, I suspect that every major charity would find a religious sponsor of some sort to keep deductability. The Church of the Red Cross would sound weird, but no weirder then Scientology.
Why the fuck do you call that a “charity tax”?
Poisoning the well?
Overhead as in the amount of charitable donation that goes to the professional for profit fund raiser (if the charity doesn’t directly raise the money) as well as how much of your donation that actually reaches the charity and then what the actual program expenses are. The link I provided covers some of this (note: the link is old and honestly the first one I found, but this has been an on going issue for decades).
In other words, how much of each dollar eventually gets to the program?