Friday, February 15, 2008


Assuming a sliding tax deduction is an idea whose time may have come (I first published on this 20 years ago) the real problem is who qualifies and who decides? Though far from perfect, the nearest tool may be the revised form 990 - the tax return most non-religious charities are obliged to prepare if their receipts exceed $100,000 or their assets are over $250,000.

This tax return - open to the public - unlike yours (presumably) offers basic information about charitable purpose, sources of funds, other financial information and a list of the board. These are primitive measures of efficiency. What the 990 does not tell us is whether the charity is effective. And the 990 won't tell us how aggressive the charity has been in seeking private funds.
Though it's not p.c. to mention it, there is a dependency culture in many social/human service agencies. They have come to depend on government grants and contracts so they expend few resources and little effort on raising money - until crunch time (cuts in funding) which by then is usually too late.

Why then should a sliding tax deduction for donors be used to bail them out? The only possible answer is that these charities are serving people who benefit from their help and in the normal course of philanthropic behavior charitable donors don't give much to human service agencies.

There are three core questions on which the sliding deduction allowance might rest:
  1. What do the charity's numbers look like going back five years?
  2. What are their sources of funds?
  3. How much of that total comes in contributions - i.e., private philanthropy?
I'm sure there are other considerations as well. What about animal shelters, the environment, religiously sponsored health and welfare agencies (e.g. the Salvation Army is the largest charity in the US but files no tax return because it is classified as a religious body)? Should overseas charities or struggling arts groups be included? Who's in? Who's not?

And who is going to decide? In our society the marketplace ultimately decides who is in and who is out. There is not too much subjectivity. But there the idea that the federal government should be in the business of regulating charities far more than they are now (through the overburdened under-resourced IRS) is not appealing. The states have made a mess of charity registration and regulation so there is an understandable reluctance to bring in the feds. But I don't see any other way.

In addition to toughening up reporting and not leaving behavior entirely up to important but essentially unenforceable codes of ethics to which the industry subscribes, federal oversight might be the best way to sort this out. As you may have read in an earlier post, I hope a new president will convene a White House Conference on Philanthropy early in his/her term, and I hope the concept of a sliding tax deduction will be an essential agenda item! What do you think?

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