Abstract
This is an analysis of the merits of four alternatives for providing governmental support to charity — the tax write-off now on the books, a tax credit, a sliding matching grant, and a percentage-contribution bonus.1 After searching for an appropriate budget mechanism (a five-year fixed-sum authorization and appropriation), we apply some wide-ranging criteria — equity, legitimacy, efficiency, reciprocity, controllability, and others — to each of the four alternatives. In brief, the present tax write-off is grossly inequitable among donors, poorly controlled by government, and is part of a tax system that citizens increasingly feel is illegitimate. The advantages of the write-off are that it produces predictable amounts of income at low administrative cost without overtly raising questions of constitutionality. Its disadvantages would be mitigated by a tax credit in proportion to the amounts contributed by taxpayers. But the credit does not reach people who do not file returns and may significantly decrease income to charitable agencies. The sliding matching grant (under which the government pays to charity in proportion as the individual gives of his income) provides a form of equity for taxpayers but is deficient in other respects. The contribution bonus — a percentage of each dollar contributed paid to charity by government — is wholly equitable, includes all givers, sustains reciprocity with recipients, is controllable by government, and is legitimate in treating expenditures as expenditures and not as tax dodges.
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Notes
Harry C. Kahn “Philanthropic Contributions,” in Personal Deductions in the Federal Income Tax. A study by the National Bureau of Economic Research. (Princeton: Princeton University Press, 1960), pp. 87–91.
Paul R. McDaniel. “Federal Matching Grants for Charitable Contributions: A Substitute for the Income Tax Deduction,” Tax Law Review, Vol. 27, No. 3 (Spring 1972), pp. 377–413.
Harry C. Kahn, op. cit.; Stanley S. Surrey, “Federal Income Tax Reform; The Varied Approaches Necessary to Replace Tax Expenditures with Direct Governmental Assistance,” Harvard Law Review Vol. 84, No. 2 (December 1970), pp. 352–408; Paul R. McDaniel, op. cit.;
Joseph A. Pechman and Benjamin A. Okner, Individual Income Tax Erosion by Income Class. Reprint 230 (Washington, D.C.: Brookings Institution, 1972).
Michael K. Taussig. “Economic Aspects of the Personal Income Tax Treatment of Charitable Contributions,” National Tax Journal, Vol. 20, No. 1 (March 1967), pp. 1–19;
Robert A. Schwartz, “Personal Philanthropic Contributions,” Journal of Political Economy, Vol. 78, No. 6 (November/December 1970), pp. 1264–1291;
Gerard M. Brannon, The Effect of Tax Deductibility on the Level of Charitable Contributions and Variations on the Theme.” (Prepared for Fund for Public Policy Research, Washington, D.C., 1974);
Martin Feldstein, On the Effects of the Income Tax Treatment of Charitable Contributions: Some Preliminary Results, December 20, 1973, Research Papers, Vol. III, Special Behavioral Studies, Foundations and Corporations, sponsored by the Commission on Private Philanthrophy and Public Needs, Department of the Treasury, 1977.
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© 1979 Aaron Wildavsky
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Wildavsky, A. (1979). A Tax by Any Other Name: The Donor-Directed Automatic Percentage-Contribution Bonus, a Budget Alternative for Financing Governmental Support of Charity. In: The Art and Craft of Policy Analysis. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-04955-4_15
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DOI: https://doi.org/10.1007/978-1-349-04955-4_15
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