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Mark Rosenman

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Taxes Are Not Charity

Posted: 09/04/2012 10:36 am

Some of the wealthiest Americans have started to contend that paying taxes and making charitable gifts are just about the same thing. Their failure to grasp the profound difference between the two presents a very real problem for nonprofit organizations and our democracy.

Mitt Romney epitomized this thinking last January when he tacked charitable contributions onto his taxes while discussing the percentage of income reported and paid on his 2010 return. He used the same calculus again a few weeks ago while defending his record and his refusal to release past tax returns.

It quickly spread: another multi-millionaire took a full-page ad in the August 20th national edition of The New York Times to oppose President Obama's tax proposals and said that "I realize paying taxes is a form of charitable giving in a sense...." Affirming such conservative and libertarian thinking, a Cato Institute official also declared that "Taxes are a form of charity."

Millionaires and other wealthy people argue that if they paid lower taxes, as they surely would under proposals put forth by Mitt Romney and in the House-approved Paul Ryan budget, they would give more to charity.

That assertion is directly contradicted by scholarly studies. We know that when taxes go down, people give less generously. Lower taxes mean that what scholars call "the price of giving" goes up; the value of the tax deduction per donated dollar is less.

The notion that the wealthy will pay out in voluntary contributions what they don't pay in mandatory taxes may seem an attractive proposition to some charities, but it just isn't so. While there may be more discretionary money in the pockets of millionaires, it tends to stay there. As a matter of fact, the wealthy give a smaller percentage of their income to charity than do moderate- and low-income people.

They also give to different charities than those with less income. The social psychologist Paul Piff who studies the effects of income on personal behavior has found that "The more wealth you have, the more focused on your own self and your own needs you become, and the less attuned to the needs of other people...." He has shown that wealth can make people "...more selfish, more insular, and less compassionate than other people."

Much of this has been known since 1990 when Terry Odendahl published Charity Begins at Home; wealthy Americans tend to support the nonprofit institutions that they themselves use. This includes elite universities, museums, operas and performing arts groups, as well as other cultural institutions and some hospitals and medical facilities. While such philanthropic activity is to be commended, few would consider these institutions to be on the frontline of charities dealing with today's most pressing problems.

And those problems grow worse with already inadequate government funding. Parks, playgrounds, roads and bridges, water mains and sewers, and the power grid are deteriorating, while efforts to save failing education, assure food safety, slow the shrinking of the middle class, alleviate poverty, protect the environment, protect and care for animals, and to address myriad other issues are all hampered by the money squeeze facing governments at every level.

While charitable support can and should be directed to solve these critical social, environmental and economic challenges, it cannot and ought not be seen as a replacement for government. We established government to hold enduring responsibility for America's public safety and welfare.

It is government that has the ability, through our democratically elected representatives, to identify and analyze threats to Americans' safety and welfare, to set priorities, and to propose and adopt appropriate responses. It is only government - at the federal, state and local levels - that has the legitimate power appropriate to these tasks. And we have given it the authority to tax us to secure the funding necessary to those purposes.

Neither civil society nor the market can fulfill the role of government, and to suggest that making a charitable contribution is the equivalent of paying taxes is to deny the legitimacy of democracy. It is to assert that individual discretion, that person-by-person preference, is an appropriate substitute for the deliberative processes of government in defining and advancing the common good, in attending to the national interest.

By claiming that they can make voluntary charitable contributions in lieu of taxes is for the wealthy to demand the right to decide what is best for the rest of us. It is the wealthy placing themselves outside and above the public will. It is an elite demand for undue and illegitimate influence in the democratic process.

This does not serve the nation or charities well. The tax money being diverted to millionaires' pockets will quite likely not make it to charities' bank accounts, especially not to those of organizations that try to serve the neediest among us.

In fact, the greed of millionaires who insist on lower taxes leads directly to the decline and actual decimation of government coffers to address myriad problems. That means that nonprofits will face growing needs of people and communities whose problems are made worse by declining government efforts at the same time that fewer tax dollars are available to support charities' programs.

The leaders of charities, in fact all people who care about the common good, need to challenge the notion that private avarice -- no matter what the false promise of additional philanthropy -- is no substitute for public responsibility.

Versions of this piece appear in The Chronicle of Philanthropy.

 
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