Charities fight possible changes on tax deductions

[thesquanderer]

7. I agree. Deductibility over-rated.

Let's say that someone has a marginal tax rate of 30% (and of course, many wealthy people manage to get it well below that). So then giving $1000 to charity only "costs" them $700 because the other $300 would have gone to the government anyway. But it still costs them $700 out of their pocket. It still only makes sense for them to give if--what a concept--they actually want to help the charity. And if that's true, they will give either way. Is the concept of giving to charity because you want to help the charity so bizarre? It makes no sense to give ONLY because of the tax deduction, because you're still ending up with less money than you started, tax deduction or no.

I suppose you could make the argument that now they will only give $700 instead of giving the full thousand, so that their actual cost of giving remains constant. But while that sounds bad for charities, I think it is important to remember that the money is coming from somewhere. In effect, since the contributor is getting that extra $300 tax deduction that allows him to give an extra $300 to the charity at no apparent cost, it also means he is paying $300 less to the government... that is, the people's fund for all public purposes. So really, it is all the rest of us who are paying $300 to his choice of charity... it is $300 less available for government services, or $300 more that will be added to the debt if we spend it anyway, because someone decided the money should go to some particular charity instead. In effect, that's our money!