Churches are charities. I’d always just accepted this at face value and not thought too much about this. (Maybe because I don’t think much about church in general?) But The Economist had a thought provoking piece last week that asked whether charities should be given special tax exemptions, and whether religious organizations should be charities.
I don’t have answers to these questions, but I want to try to reframe them in a more organize way so the questions are more obvious.
Question 1: Should Taxpayers Get Tax Deductions for Charitable Giving? If so, how much?
Arguments in favor of heavy tax deductions:
- Taxable income should only include personal consumption and wealth creation. Money given to charity is neither.
- Charities do public work, and charitable giving can be seen as a form of public expenditure that provides benefits to society that the state might spend more to provide itself
- Robert Reich of Stanford argues that whatever a person decides to do with his own money is by definition consumption, whether this is buying luxury goods or giving to charity (which buys him social status and “feeling good”)
- Recent economic research suggests that the elasticity of tax-donations is low, meaning that giving more tax breaks does not lead to an equal amount of money being given to charity. In other words, people seem to give to charity in a way that isn’t strongly correlated to the tax deduction rate.
Question 2: What types of organizations should be classified as charities (and in turn deserve the accorded tax exemptions of charities)?
- Churches generally use most of their money to support their church members. Charity generally means helping others outside your organization. Should churches therefore be called charities?