I can count the number of times on one hand that I have ever given to a charity. While I have donated to charity out of necessity (I gave excess clothes and shoes before a big move), I don’t believe in it as a principle and I actually think it does far more harm to society than good. This isn’t a high minded defense of miserliness–in fact, I would argue that the existence of charities perversely encourages institutionalized penny pinching and stinginess towards the most vulnerable members of our society.
Charitable giving in its current form promotes a dysfunctional and hypocritical kind of generosity. The idea that the vulnerable must depend on the benevolence of others for survival is an obscene and sadistic societal value, which I believe is contributing to our regression into feudalism. Further amplifying my disgust is how our tax code subsidizes all this “charitable giving”, which has cost the US Treasury $182 billion between 2010 and 2014 (and this doesn’t even include donations to educational and health care institutions)–which is plenty of money that could have gone to fund anti-poverty government programs that are currently facing the axe in Congress.
How To Look Generous Without Actually Being Generous: How Tax Deductions Subsidize The Priorities And Lifestyles Of The Wealthy
The charitable tax deduction is just another way to extract public subsidies in the name of private generosity. Political economist Robert Reich sums it up, noting that “…a tax deduction (in economic terms) is the same as government spending. It has to be made up by other taxpayers.”
Higher education is one of the favorite causes of the upper class, which is unfortunately out of reach for the vast majority of tax paying Americans. However, this does not stop the average taxpayer from footing at least 33% of the donation bill:
“Because of the charitable tax deduction, the amount of government subsidy to these institutions in the form of tax deductions is about one out of every three dollars contributed…A few years back, Meg Whitman, now CEO of Hewlett-Packard, contributed $30 million to Princeton. In return she received a tax break estimated to be around $10 million. In effect, Princeton received $20 million from Whitman and $10 million from the U.S. Treasury – that is, from you and me and other taxpayers who made up the difference. Add in these endowments’ exemptions from taxes on capital gains and on income they earn, and the total government expenditures is even larger. Divide by the relatively small number of students attending these institutions, and the amount of subsidy per student is huge.” Robert Reich, Alternet
Fine art is also a popular charitable cause among the wealthy, which provides plenty of juicy tax shelter opportunities that are ripe for the taking. Ronald Lauder, heir to the Estee Lauder cosmetics empire and avid art collector, has practically perfected the art of charitable donation as tax loophole. David Kocieniewski of the New York Times reports:
“By donating his art to his private foundation, Mr. Lauder has qualified for deductions worth tens of millions of dollars in federal income taxes over the years, savings that help defray the hundreds of millions he has spent creating one of New York City’s cultural gems.
“The charitable deductions generated by Mr. Lauder — whose donations have aided causes as varied as hospitals and efforts to rebuild Jewish identity in Eastern Europe — are just one facet of a sophisticated tax strategy used to preserve a fortune that Forbes magazine says makes him the world’s 362nd wealthiest person.”
Felix Salmon of Reuters breaks it down further, explaining how “donating” to your own foundation can count as “charitable giving”:
“It seems that Lauder has not actually donated his $135 million portrait of Adele Bloch-Bauer to the gallery; if and when he does, however, he’ll be able to deduct the full amount from his taxes at the top marginal rate of 35%, and thereby reduce his tax bill by more than $47 million. (If he can persuade the IRS that the painting has risen in value since he bought it, the deduction would be worth more still.)
“Put another way, the government will spend $47 million so that Ronald Lauder can transfer a painting from his own ownership to that of a museum he controls. The painting doesn’t even need to be moved into the museum: it’s there already, and has been there since the day the museum opened. As far as the public and the art world are concerned, nothing will have changed — but as far as Lauder is concerned, he has a “reduce your tax bill by $47 million any time you need to” card just sitting in his back pocket.”
What Counts As A Tax Exempt Nonprofit Institution?
It’s quite simple, writes Joanne Fritz, About.com’s resident nonprofit expert:
“The term, nonprofit, is used rather loosely to describe groups that come together to achieve a mission that involves serving the public good, rather than to make a profit…As a result, these group(s), because it works for the “common good,” would be exempt from the state and federal taxes a for-profit corporation would have to pay, making it, to some extent, publicly subsidized.”
Given the rather vague definition, it’s easy to see how it can apply to almost any organization looking to evade taxes. This is not an exaggeration–the NFL, NCAA, NBA, NHL, Harvard, and the Miss America Pageant all qualify as tax exempt nonprofits despite millions or billions in revenue or endowments.
While all charities are technically nonprofits, not all nonprofits are technically charities. The NFL, NBA, and NHL justify their tax exempt status by claiming to be a trade association, much like the American Medical Association or the Chamber of Commerce. Despite the clever legalese over the exact nature of organizational classification, this much is undeniable: tax exempt status is just another form of charity, and it’s costing American taxpayers untold billions in lost revenue and higher taxes.
Financing Religion On The Tax Payer’s Dime
Religious groups are completely tax exempt, and do not need IRS approval to legitimize their status. The following is a complete accounting of religion’s unique privileges, which may be vomit inducing to the secularists among us.
- Churches don’t pay tax on donations, while donors can (and do) claim said donations on their taxes
- Religious institutions are exempt from property taxes, which are used to finance vital public services that benefit the entire community (including the churches in the area) like police protection and firefighting.
- No applicable investment taxes paid on profitable investments.
- No applicable state sales tax on any purchased goods and services.
- Ministers, priests, and rabbis have a parsonage exemption, which means they are allowed to deduct the cost of their housing (mortgage, rent, furnishings, maintenance, etc.) from their taxable income, unlike the rest of us chumps.
According to a study commissioned by the Council for Secular Humanism, taxpayers provide at least $71 billion in annual subsidies to support religious organizations. The Washington Post estimates the real cost to be around $83.5 billion. So much for the separation of church and state.
Starving Public Institutions And Programs That Overwhelmingly Benefit The Poor And Middle Class
Meanwhile, the American War on the Unrich continues unabated as government social programs and public education get their turn at the chopping block. Last year, President Obama signed an $8.7 billion cut (over 10 years) in the food stamp program into law, which will affect up to 850,000 needy households. However, it seems that these cuts just don’t go far enough for the cold of heart–the budget submitted by the Republican Congress includes $1.1 trillion in unspecified spending cuts, which are sure to negatively impact programs such as the earned income tax credit, food stamps, Pell Grants, and veterans disability benefits.
Meanwhile, public higher education institutions are feeling the strain from shrinking budgets due to falling tax revenues:
“They get almost all their funding from state governments. But these subsidies have been shrinking. State and local financing for public higher education came to about $76 billion last year, nearly 10 percent less than a decade before. Since more students attend public universities now than 10 years ago, that decline represents a 30 percent drop per student. That means the average annual government subsidy per student at a public university comes to less than $4,000, about one-tenth the per student government subsidy at the elite privates…” Robert Reich, Alternet
Our assumptions about the true nature of charity have cost our society dearly, not just in dollars and cents, but also in terms of social and economic justice. Financing our private virtue on the taxpayer’s dime is not just disingenuous and hypocritical–it’s legitimized theft and misappropriation of public funds. If we truly care about preserving the meaning of virtue, then we need to be willing to actually earn it. Financing a cheap version of it on the backs of others may be cost effective (and extremely lucrative) to the individual donor in the short run, but eventually it’s the rest of society that has to pay the bill. The interest on our charity financing scheme are being compounded as the Piper makes his way to our doors. Whether we can eventually pay for the true cost for our ill gotten virtue shall remain to be seen.