Thursday, April 30, 2009

Every decade some politician proposes to cut back on the tax deduction for charitable giving. Previously it was Steve Forbes with his flat tax. Now the Obama administration is floating the idea. In the previous post, Vastine discussed the impact such a proposal would have on the arts. I will examine its impact on other areas of charitable giving.

Proponents seem to be driven by two motivations. First, it would allegedly generate revenue for the Federal government. Second, there is a desire to punish the rich in order to narrow the gap between the rich and the poor. Unfortunately, restricting charitable giving is a clumsy tool for accomplishing those purposes.

The treasury may benefit at first, but the government should weigh what it would lose when charitable giving is lowered. Private giving plays an enormous role in supporting various eleemosynary organizations in fields such as health education, and aid to the disadvantaged.

The walls of hospitals are plastered with the names of benefactors who contribute major support for the construction of ongoing capital improvements. Private funding has joined with government in seeking and finding ways to cure many diseases which were once deemed fatal or permanently disabling. Universities, even public universities, depend on private funds to support faculties, research, capital improvements, scholarships and even routine maintenance of their schools. In fact university giving for scholarships have allowed more and more universities proudly claim that any qualified applicant can earn a degree regardless of the level of their family income. United Way has been embraced by the business community and become an a dominant force in identifying and supporting the many social services in the local community.

As the world grows flat, so does the benevolent spirit. Multi billionaires such as Ted Turner and Bill Gates, have addressed the problems of world poverty. Rotary International joined with the World Health Organization and others to eradicate polio. The United Methodist Church founded Africa University in Zimbabwe, which has dramatically opened the doors of opportunity to young African that could not have been dreamed about a few decades ago. Doctors Without Borders are bringing the blessing of modern medicine to remote parts of the earth.

These and many other examples underline the fact that private giving has created a gigantic infrastructure which, if it did not exist, would drop into the lap of government agencies. Therefore, the effort to raise money for the government by reducing charitable giving deductions would contribute to new demands on the treasury in the long run.

Private is extremely effective in identifying causes meriting support. The donor tends to support the cause that is most important to him or her. Thus private support is spread in different directions. Many eyes looking at the needs of society should be preferred over leaving the decision making power over the use of available funds to handful of bureaucrats.

Moreover, much has been said about a trend toward a widening gap between the income of the rich and the poor. Assuming that the gap is growing, philanthropy tends to counterbalance that trend. After all, philanthropy involves giving by the rich to the poor.

Finally, charitable giving has the effect of lifting the human spirit. I submit that sharing our resources encourages us to be more understanding of each other. Monty and I had the privilege of participating in a mission trip to Panama, not long after our government had bombed Panama City. Each member of the group contributed money and labor toward the construction a community center in a small development that had been constructed by our denomination for families whose homes had been bombed out during the raid. When it was time to return home, one of our members removed his shoes and give them to a young Panamanian who had worked beside him that week. Reversing roles, my friend left Panama barefooted and the Panamanian said goodbye to him wearing shoes.

In the mean time, if you are ever in Birmingham, please come by our church, Highlands United Methodist Church. We try to do our part. We feed over a hundred homeless every day, give them clothing, wash their clothes, and obtain identification cards for those who need them to get jobs. We provide Santa Claus for children in one of our economically depressed areas. Some of our members participate in an annual medical mission to Central America. Our youth travel to Appalachia every year where they repair run down houses.

These programs are supported by our members— and their gifts are tax deductible.

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