14 April 2017

ACR Blog: Don’t Use Tax Reform to Curb Philanthropic Freedom

Philanthropic freedom is a hallmark of American civil society, which is why it is disturbing to see how often it is threatened. Take, for example, a recent Forbes editorial from Jeffrey H. Joseph, a professor at George Washington University’s School of Business. Joseph argues that tax reform should be used as a mechanism to improve charities that the government would deem as inefficient.

“But there’s one opportunity that no one is talking about, which ought to receive bipartisan support: Eliminating or scaling back the tax break for donating to lousy charities. This reform will force improvements to the charity sector’s fundraising and spending practices, which can be scandalously poor yet difficult to regulate,” Joseph wrote.

Joseph then goes on to list a few of the bad actors that, miraculously, and without government intervention, were publicly deemed to be inefficient and wasteful. And while he cites how much money Treasury could raise from trimming the charitable deduction by, for example, installing a 2 percent AGI floor (which all but eliminates the charitable deduction for low- and middle-income Americans), Joseph argues that this proposal is not about revenue.

“But this is not about generating long-term revenues to the Treasury. Donors will quickly learn which charities they’ve given to don’t qualify for tax deduction. Ultimately, as money shifts from bad to good charities (and bad charities reform their practices), government revenue from the deduction reform will fall,” Joseph writes.

Joseph is advocating for the government to create a one-size-fits-all model to determine how Americans should spend their charitable assets. It appears he doesn’t believe that Americans can figure out for themselves which charities they should support. It is plain to see why this is such a threat to philanthropic freedom, a notion Joseph himself is even cognizant of by stating in the same editorial, “Regulating bad charities also quickly steps into a First Amendment minefield.”

In addition to serving as an incentive for people to give money away for the benefit of others, the purpose of the charitable deduction is to serve as a guardrail between the charitable sector and government intrusion. What Joseph is advocating for directly contradicts that purpose, curtailing the guardrail between government and the charitable sector, ultimately curtailing philanthropic freedom.