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Robert Reich
NationofChange / Op-Ed
Published: Friday 13 December 2013
If Congress ever gets around to revising the tax code, it might consider limiting the charitable deduction to real charities.

When Charity Begins at Home (Particularly the Homes of the Wealthy)

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It’s charity time, and not just because the holiday season reminds us to be charitable. As the tax year draws to a close, the charitable tax deduction beckons.

America’s wealthy are its largest beneficiaries. According to the Congressional Budget Office, $33 billion of last year’s $39 billion in total charitable deductions went to the richest 20 percent of Americans, of whom the richest 1 percent reaped the lion’s share.

The generosity of the super-rich is sometimes proffered as evidence they’re contributing as much to the nation’s well-being as they did decades ago when they paid a much larger share of their earnings in taxes. Think again.

Undoubtedly, super-rich family foundations, such as the Bill and Melinda Gates Foundation, are doing a lot of good. Wealthy philanthropic giving is on the rise, paralleling the rise in super-rich giving that characterized the late nineteenth century, when magnates (some called them “robber barons”) like Andrew Carnegie and John D. Rockefeller established philanthropic institutions that survive today.

But a large portion of the charitable deductions now claimed by America’s wealthy are for donations to culture palaces – operas, art museums, symphonies, and theaters – where they spend their leisure time hobnobbing with other wealthy benefactors.

Another portion is for contributions to the elite prep schools and universities they once attended or want their children to attend. (Such institutions typically give preference in admissions, a kind of affirmative action, to applicants and “legacies” whose parents have been notably generous.)

Harvard, Yale, Princeton, and the rest of the Ivy League are worthy institutions, to be sure, but they’re not known for educating large numbers of poor young people. (The University of California at Berkeley, where I teach, has more poor students eligible for Pell Grants than the entire Ivy League put together.) And they’re less likely to graduate aspiring social workers and legal defense attorneys than aspiring investment bankers and corporate lawyers.

I’m all in favor of supporting fancy museums and elite schools, but face it: These aren’t really charities as most people understand the term. They’re often investments in the life-styles the wealthy already enjoy and want their children to have as well. Increasingly, being rich in America means not having to come across anyone who’s not.

They’re also investments in prestige – especially if they result in the family name engraved on a new wing of an art museum, symphony hall, or ivied dorm.

It’s their business how they donate their money, of course. But not entirely. As with all tax deductions, the government has to match the charitable deduction with additional tax revenues or spending cuts; otherwise, the budget deficit widens.

In economic terms, a tax deduction is exactly the same as government spending. Which means the government will, in effect, hand out $40 billion this year for “charity” that’s going largely to wealthy people who use much of it to enhance their lifestyles.

To put this in perspective, $40 billion is more than the federal government will spend this year on Temporary Assistance for Needy Families (what’s left of welfare), school lunches for poor kids, and Head Start, put together.

Which raises the question of what the adjective “charitable” should mean. I can see why a taxpayer’s contribution to, say, the Salvation Army should be eligible for a charitable tax deduction. But why, exactly, should a contribution to the Guggenheim Museum or to Harvard Business School?

A while ago, New York’s Lincoln Center held a fund-raising gala supported by the charitable contributions of hedge fund industry leaders, some of whom take home $1 billion a year. I may be missing something but this doesn’t strike me as charity, either. Poor New Yorkers rarely attend concerts at Lincoln Center.

What portion of charitable giving actually goes to the poor? The Washington Post’s Dylan Matthews looked into this, and the best he could come up with was a 2005 analysis by Google and Indiana University’s Center for Philanthropy showing that even under the most generous assumptions only about a third of “charitable” donations were targeted to helping the poor.

At a time in our nation’s history when the number of poor Americans continues to rise, when government doesn’t have the money to do what’s needed, and when America’s very rich are richer than ever, this doesn’t seem right.

If Congress ever gets around to revising the tax code, it might consider limiting the charitable deduction to real charities.

This article was originally posted on Robert Reich's blog.



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ABOUT Robert Reich

 

ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org. Robert Reich's new film, "Inequality for All" is available on DVD
and blu-ray, and on Netflix in February.

In America, under

In America, under Judeo-Christian principles, especially the rich should be giving without ever getting any tax brakes.. The religious institutions who enjoy tax excempt and non profit status and meddle with our politics and private lives should be stripped immediately of those privileges! There should not be these obscene salaries for the CEOs like for example the Red Cross to whom I no longer give a penny! I rather give directly to those who need it. What about all the volunteers who do not get paid a cent and never get a tax brake while the rich do? With the hurricane in the Philippines I do not see the Koch brothers or the like of them opening their filthy wallets!

. . . Charity Begins at Home

. . . Charity Begins at Home . . . the problem is that it isn't charity when you deduct it from your taxes........I have never declared anything I have given as a deduction....AND IT WAS CHARITY - TRUE CHARITY

How about protecting the

How about protecting the environment? You can not heal ecosystems without ending poverty, you can not end poverty without healing ecosystems

Exactly.. It's only Real

Exactly..

It's only Real Compassion, Real Charity when you uplift the bottom 40%, when you have no skin in the game.

These are establishd Win/Wins for the wealthy. You can also be certain that the administrative co$ts are also in the 6 to 7 figure range for the top officials & lawyers. It's a Larceny Game to throw a charitable party with their class friends/acquaintances only in attendance and they then use it as a Tax deduction. The bottom-lining of the 'Good Will' rich and institutions needs to Stop!

True 'Good Will' is not in a Store that pays the handicapped employee's pennies on the dollars they receive. Regulating what qualifies as a Charity is mandatory. Regulating what Corporations or Institutions qualify for no Taxation, Tax breaks, Tax Deductibles & Tax Subsidies. No loop holes. I've often thought that County, State, Inter-State, National, to International companies should be part of the Taxation along with limitation on Subsidy's the bigger you get. And then do the same in regards to personal wealth ranges in the percentage of American people . It must be equitable to their survival and 'living wage +' for the many ... not 'living wage +to infinity' for the few.

There should be no Greed in Giving. You gift & then you walk away.

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