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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...but another reason for laying heavy taxes on the top tiers of the economy is related to our self-defense as a society. Prospective oligarchs always arise from the filthy rich class. Whether they are Kochs, Adelsons, or Waltons, people with ridiculous amounts of money can't seem to keep their gigantic fortunes out of our political system, and democracy itself is always under assault. We need a tax system that inhibits the development of potential usurpers.
Yes, the rich are much more likely to get welfare and medicaid. They pay for the public schools, and then pay again to send their own kids to private schools that have not been corrupted by teacher unions. Just walk into any government office that provides "services," and you will observe dozens of CEO's, standing in line, eating caviar and drowning kittens, waiting for their government handouts. Of course, that's not what YOU mean. The government "services" YOU have in mind is when the government DOESN'T tax some of the money the rich have earned. Such service! I earn money, and the government lets me keep half of it. Such generosity! Such largesse! They deserve a nice tip. Maybe 20%?
Interesting argument. I disagree that taxes are "charitable giving;" they are part of the price we pay for having and using common goods, services, and protection. Here's the thing, though. For a fundamentalist tithe-paying christian, I would argue that the tithe is not charitable giving, but a form of tax. Here's why:
1. It's mandatory. Tithing is not considered optional. In order to work for a fundamentalist denomination (like SDA's) you must be a tithe-paying member in good standing. It's not optional. The perception is that that's money owed to the church.
2. In the SDA church, and in the LDS church, if I read right, the tithe does not go for the support of the needy, but for support of the ministers, and furthering evangelical goals. In other words, it's not charity.
If we really want to change the tax code, I suggest that tithe monies be removed from charitable giving. It's not considered a gift, nor is it considered optional, nor does it go to help the needy.
How do you feel about Charitable foundations like Bill Gates and Warren Buffet used to avoid all taxes [capital gain and death tax] on $ 60 billion dollars - they still control the money and will then get to deduct the donation at face value not cost . . so there is another $ 60 billion they will not pay 35 or 39 on ordinary income profits . .
It amazes me how much the rich say "you can't get something for nothing" and then turn around and expect to get all the benefits of a 1st world nation while rigging the game to pay as little as possible for it.
Other 1st world nations have much broader tax bases including higher taxes at lower pay ranges and national value added taxes.
Here in the US, the middle class and those with lower than average incomes get back considerably more in government services than they pay for it. The system is rigged for them by politicians who would rather borrow lavishly to buy votes rather than tell it like it is.
Of course the title of this piece is true. Taxes are not charity. When you give to the government, you lose control of how the money is spent. When you give to United Way, you have a bit more control, and with direct charity you have the most.
Charity is not the same as taxation. Taxation ensures that everyone's money goes to what is needed for our government spending--whether you agree with all that spending or not. Charity goes to whatever organization you like, even if it's not a pressing need as stated in the article.
Romney is wrong about most things, but I do think he is on to something with his advocacy of simplification of the tax code. Eliminate all the wiggle room, and the richest will pay lots more.
In effect, you have a regressive system in the US. A flat tax always brings howls of protest, but in actual fact, a flat tax, properly set up, could result in a massive tax increase on the wealthiest (primarily those who shovel money around, rather than doing actual work).