"I'm all in favor of supporting the arts and our universities," writes Robert Reich, "but let's face it: These aren't really charitable contributions. They're often investments in the lifestyles the wealthy already enjoy and want their children to have too. They're also investments in prestige -- especially if they result in the family name being engraved on the new wing of an art museum or symphony hall."
Agreed. The tax deductibility of charitable donations to private universities, the arts, and so forth are a bit of a scam. This year the Treasury will forgo $40 billion in tax revenue due to the deductibility of philanthropic donations. That makes sense when the money is going to feed the poor -- but studies show that only 10% of charitable donations go directly to the poor. And there's no reason the rest of us should be subsidizing an I-banker's desire to fund a named chair at his alma mater and, oh yeah, help his kid get into the school to boot.
Additionally, charity has become something of a lifestyle, with large donations buying you entrance into concerts, gala dinners, special exhibits, networking events (see Global Initiative, Clinton), and much else. In such cases, charitable donations are closer to purchasing tickets than selflessly and anonymously giving up private wealth for public ends. "Awhile ago," says Reich, "New York's Lincoln Center had a gala supported by the charitable contributions of hedge-fund industry leaders, some of whom take home $1 billion a year. I may be missing something, but this doesn't strike me as charity. Poor New Yorkers rarely attend concerts at Lincoln Center." And they shouldn't be subsidizing those who do.
"So here's a modest proposal," finishes Reich. "At a time when the number of needy continues to rise, when government doesn't have the money to do what's necessary for them and when America's very rich are richer than ever, we should revise the tax code: Focus the charitable deduction on real charities."
