View Poll Results: Tax credit for charitable donations?

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  • I am liberal; I like the idea.

    1 9.09%
  • I am moderate; I like the idea.

    2 18.18%
  • I am conservative; I like the idea.

    3 27.27%
  • I am liberal; I don't like the idea.

    3 27.27%
  • I am moderate; I don't like the idea.

    1 9.09%
  • I am conservative; I don't like the idea.

    1 9.09%
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Thread: Tax credit for charitable donations?

  1. #1
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    Tax credit for charitable donations?

    I'm just brainstorming here...this idea just popped into my head a couple hours ago, so it's probably not completely thought-out. Maybe you folks can tell me the flaws with this plan (or if you like it).

    Conservatives often say that government social programs are not as efficient as private charities. Liberals often counter that while that may be true, there simply aren't enough charitable donations, and we need taxes to compel people to give. I was thinking that maybe there is a way to combine the strengths of both ideas.

    Currently, charitable donations in the United States are treated as TAX DEDUCTIBLE. This means that for every $1 you spend on charity, your tax burden is lowered by 10 to 35 cents (depending on your tax bracket). What if instead you received a TAX CREDIT for charitable donations? This would mean that for every $1 you spend on charity, your tax burden would be lowered by $1.

    As I see it, most people would choose to give their ENTIRE tax burden to charity rather than to the government. Thus, private charities would be able to more efficiently allocate the resources than government social programs, and people would still be compelled to give back to society. Obviously there would need to be some exceptions for things that the non-profit sector CAN'T handle (e.g. military, police, courts, administrative) that would still need to be taxed.

    I'm wondering what you guys think of the idea. Please point out any reasons it wouldn't work and/or ways that it could work even better.
    Last edited by Kandahar; 10-19-10 at 03:01 AM.
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  2. #2
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    Re: Tax credit for charitable donations?

    The biggest flaw is that money is not going to end up in places where it is needed. For example, the sewage treatment charity is going to bemassively underfunded, while the save cute animals group is going to have more money than it could ever need. The public is far too easily manipulated and would inevitably send all their money to trendy and popular causes while ignoring vital ones.

  3. #3
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    Re: Tax credit for charitable donations?

    Quote Originally Posted by rathi View Post
    The biggest flaw is that money is not going to end up in places where it is needed. For example, the sewage treatment charity is going to bemassively underfunded, while the save cute animals group is going to have more money than it could ever need. The public is far too easily manipulated and would inevitably send all their money to trendy and popular causes while ignoring vital ones.
    That's definitely a problem...however, I think Congress is quite adept at misallocating money as well (e.g. too much to agriculture subsidies, not enough to economic stimulus).

    I was thinking of applying it more to social programs (e.g. social security, Medicare, unemployment insurance, food stamps, non-military foreign aid) that typically benefit people in need. What if people could allocate their social program taxes to a charity of their choice, and they still paid taxes as normal for public services like sewage treatment?
    Last edited by Kandahar; 10-19-10 at 05:43 AM.
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  4. #4
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    Re: Tax credit for charitable donations?

    That's definitely a problem...however, I think Congress is quite adept at misallocating money as well (e.g. too much to agriculture subsidies, not enough to economic stimulus).
    True, but but is more the magnitude at which congress plays with money. The rely on the fact that the federal budget is so large that skimming off a few million here or there won't noticed among a budget of trillions. They might take 5% of the sewage treatment budget for some pork project in their district, but they are mindful that taking too much will break the system and draw attention to their misdeeds.

    I was thinking of applying it more to social programs (e.g. social security, Medicare, unemployment insurance, food stamps, non-military foreign aid) that typically benefit people in need. What if people could allocate their social program taxes to a charity of their choice, and they still paid taxes as normal for public services like sewage treatment?
    So what, a charity just springs up over night complete with the organizational system that is capable of handling the healthcare needs for millions of seniors? The odds that a private charity will instantly form for every basic social need, be well organized enough to handle the issue, and somehow receive enough funding every year despite a completely random revenue stream are terrible. Maintaining stability is a primary benefit of social programming, and you undermine that motive by making the system so chaotic.

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    Re: Tax credit for charitable donations?

    I support it wholeheartedly - to an extent. Rathi does show a clear market failure when funding is given power to the giver instead of the taker. We need some level of taxation to ensure the services that most of us take for granted are still allocated to the general populace. However, I would like to see more private charity incentivization through the use of a pure credit. This way, you can make it as close to a la carte as humanly possible, like maybe you'd rather see money go to the United Way than freely given to Israel.

    Tax money should go to national defense, infrastructure, and a few other public goods that clearly cannot be compensated through the private sector. Everything else, let the people decide how their money is spent.

  6. #6
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    Re: Tax credit for charitable donations?

    Quote Originally Posted by Kandahar View Post
    I'm just brainstorming here...this idea just popped into my head a couple hours ago, so it's probably not completely thought-out. Maybe you folks can tell me the flaws with this plan (or if you like it).

    Conservatives often say that government social programs are not as efficient as private charities. Liberals often counter that while that may be true, there simply aren't enough charitable donations, and we need taxes to compel people to give. I was thinking that maybe there is a way to combine the strengths of both ideas.

    Currently, charitable donations in the United States are treated as TAX DEDUCTIBLE. This means that for every $1 you spend on charity, your tax burden is lowered by 10 to 35 cents (depending on your tax bracket). What if instead you received a TAX CREDIT for charitable donations? This would mean that for every $1 you spend on charity, your tax burden would be lowered by $1.

    As I see it, most people would choose to give their ENTIRE tax burden to charity rather than to the government. Thus, private charities would be able to more efficiently allocate the resources than government social programs, and people would still be compelled to give back to society. Obviously there would need to be some exceptions for things that the non-profit sector CAN'T handle (e.g. military, police, courts, administrative) that would still need to be taxed.

    I'm wondering what you guys think of the idea. Please point out any reasons it wouldn't work and/or ways that it could work even better.
    I think it's a positively AWFUL idea.

    #1 -- That tax credit is YOUR/OUR money.
    #2 -- The government will not be short-changed, for heaven's sake. Taxes will just be raised in other areas to compensate.

    I can't understand what in the world you're thinking.
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  7. #7
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    Re: Tax credit for charitable donations?

    I misunderstood the question. I didn't read it right until after I voted. I don't think this is a good idea. There are plenty of people who are just barely making it themselves, who cannot afford to give how much they owe in taxes to charity. But there are a lot of rich people who would give to the charity of their choosing, which may not actually help society as a whole. And the government still has to be paid for. I don't see that happening if the majority of people are giving to charity. Military operations cannot be paid for through charity. Education cannot be completely paid for through charity. There are many other examples of things the government does that can't be paid through charity.
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  8. #8
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    Re: Tax credit for charitable donations?

    I think its a good idea as long as there is an upper limit to it. If not, than expect government debt to go way up. Plus a good number of charities are pretty much useless.

    One other thing is that it would definitely have to be a charity and not simply a nonprofit.
    Last edited by tacomancer; 10-19-10 at 04:11 PM.

  9. #9
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    Re: Tax credit for charitable donations?

    This kinda thing can be crappy.

    When I was younger and Dvd players had really started to hit the market, I went to the salvation army, where I had a friend who worked there.
    Someone had dropped off a couple of almost brand new DVD players, in my excitement I picked them up for a song, only to find out that they were both broken.

    The dude gave them for charitable reasons and as a tax write off.
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  10. #10
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    Re: Tax credit for charitable donations?

    Quote Originally Posted by MaggieD View Post
    #1 -- That tax credit is YOUR/OUR money.
    So?

    Quote Originally Posted by MaggieD
    #2 -- The government will not be short-changed, for heaven's sake. Taxes will just be raised in other areas to compensate.
    Not necessarily. If private charities had more money, it would reduce the need for some government social programs (and thus reduce the need to tax).

    Quote Originally Posted by MaggieD
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